U.S. Housing, Confidence Data Point to Recovery
September 2009 Press & Charter
By Ros Krasny, Tue Aug 25, 2009
CHICAGO (Reuters) - Larger-than-expected gains in U.S. housing prices and consumer confidence on Tuesday lent new weight to views that the economy is emerging from the longest recession since the 1930s.
U.S. single-family home prices rose for the second month in a row in June, according to a closely watched index, and consumer confidence jumped in August.
In addition, President Barack Obama nominated Ben Bernanke to a second term as chairman of the Federal Reserve, removing some niggling doubt from investors’ minds.
The move promised a consistent approach to monetary policy in the years ahead.
The developments helped buffer the blow of projections for the U.S. budget deficit to reach its highest level in 2009, relative to the total economy, since World War Two.
“The recession appears to be over, with consumer attitudes lagging behind broad economic developments,” said Steven Wood, chief economist at Insight Economics in Danville, California.
The Conference Board, an industry group, said consumer confidence climbed to a reading of 54.1 in August from 47.4 in July, handily beating forecasts, on an improved outlook for the job market and the overall economy.
“Confidence remains well below its historical average of 95 and it has not even regained the level of 61 seen before the collapse of Lehman almost a year ago,” said Paul Dales, U.S. economist at Capital Economics in Toronto.
The weak labor market remains a sticking point to recovery, and especially a revival in consumer spending. Even the Fed has conceded the likelihood of a “jobless recovery,” with the unemployment rate staying high long after growth resumes.
Americans saying that jobs were “hard to get” in August dropped to 45.1 percent from 48.5 percent but only 4.2 percent said jobs were plentiful.
“Most of the strength was in the ‘expectations’ component, so it looks like even though the near-term conditions are still a bit rocky, there is hope for the future,” said Kim Rupert, managing director, global fixed income analysis, Action Economics LLC in San Francisco.
Housing Prices in Broad-based Gains
Other data supporting recovery hopes came from the Standard & Poor’s/Case-Shiller housing price index. The housing market is considered a critical component to an economic recovery.
Prices of U.S. single family homes rose by 1.4 percent in June from May, after creeping up by 0.5 percent in April, suggesting the crippling housing slump is easing.
June’s improvement was broad based, with 18 of 20 metropolitan areas logging gains for the month.
“The most important take-away is the breadth of the rise,” said Adam York, economist at Wells Fargo Securities in Charlotte, North Carolina. “The absolute worst is behind us.”
Separately, the Federal Housing Finance Authority said U.S. home prices rose by 0.5 percent in June, according to its seasonally-adjusted monthly index, while prices fell by 0.7 percent in the second quarter.
“The S&P/Case-Shiller report dovetails with evidence from the FHFA house price index and the National Association of Realtors existing home sales report, suggesting that house price deflation has bottomed,” said Anna Piretti, economist at BNP Paribas in New York.
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