Originally published at The Boock Report
Home price gains y/o/y accelerated in September to 6.2%, the quickest since July 2014, according to the Case-Shiller index. This is great if one is a seller and tougher for those looking to buy. We have had a tremendous housing PRICE recovery while a housing TRANSACTION recovery has been more modest with trends still below long-term averages. The 20 city seasonally adjusted index is now 5% above the 2007 bubble peak. Versus a year ago, Seattle is the hottest market with Chinese money being a key reason as home price taxes have risen in Vancouver. Prices there rose almost 13% y/o/y. A 9% gain in Las Vegas was #2. Price gains lagged in Washington, DC, and Chicago.
Case Shiller 20 City HPI
The Conference Board Consumer Confidence index for November rose to 129.5 from 126.2. That was 5.5 pts better than expected and is at the highest level since November 2000. After falling sharply over the past few months, confidence of those under the age of 35 rose to the best also since late 2000. Confidence also was strong for those older than 55 while it fell almost 10 pts for those aged 35-54. Most of the confidence gain came from the Expectations component but the Present Situation was up too.
A key reason for the improvement in confidence was the answers to the labor market questions where those that said jobs were Plentiful rose for a 2nd month while those that said jobs were Hard to Get fell for a 4th straight month. Those expecting Higher Income fell .2 pts while most expect it to stay the same. There was an almost 4 pt rise in those expecting more overall employment. Business conditions rose slightly m/o/m.
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Spending intentions were mixed. After jumping in October by almost 2 pts, those that plan on buying a car fell back by 1.4 pts. Again, post-hurricane activity has been particularly impactful on autos. Those that plan on buying a home rose .5 pt but after falling by 1 pt last month. Those that plan on buying a major appliance was up 3.2 pts but after falling by 5 pts in October. One year inflation expectations fell 2 tenths to 4.5% which matches the lowest level since 2005.
The Conference Board bottom lined the report by saying “Consumers are entering the holiday season in very high spirits and foresee the economy expanding at a healthy pace into the early months of 2018.”
Bottom line, it’s great to see the continued improvement in confidence but it never is a leading indicator on business activity. As stated in the past, extremes typically coincided with inflections instead. In the last cycle, consumer confidence peaked in July 2007 and bottomed in February 2009. In the expansion before, it peaked in May 2000 and bottomed in March 2003.
The Richmond manufacturing index jumped 18 pts m/o/m to 30 and that was way above the estimate of 14. It happens to be the highest on record for this figure dating back to 1993. All of the key components were higher except Wages unfortunately (but the 6-month outlook on wages did rise). Price pressures also accelerated. Bottom line, this is an impressive number “but a smaller share of firms raised their expectations than had in October in all areas, except for wages and capital expenditures.
Notwithstanding the data today, US Treasuries didn’t respond at all as it never does to these grade b numbers.
I want to add a comment on the tax bill and the trigger that I’m hearing more about where taxes would rise if revenue hurdles were not met. I think this is a terrible idea as just when tax receipts falter because of a slower economy, Congress would be raising taxes. Of course, there is no discussion on cuts in spending.
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