Consumer Confidence Remains Stable Despite Concerns About Future


Consumer confidence held steady in March, with optimism about current conditions offset by concerns about the future economic outlook. This pessimism was primarily driven by persistent inflation, especially elevated food and gas prices. The Consumer Confidence Index, reported by the Conference Board, stood virtually unchanged at 104.7 in March, the lowest level since November 2023. The Present Situation Index rose 3.4 points from 147.6 to 151.0, while the Expectation Situation Index fell 2.5 points from 76.3 to 73.8. Historically, an Expectation Index reading below 80 often signals a recession within a year. Consumers’ assessment of current business conditions fell slightly in March. The share of respondents rating business conditions as “good” decreased by 0.9 percentage points to 19.5%, but those claiming business conditions as “bad” also fell by 0.5 percentage points to 17.2%. Meanwhile, consumers’ assessments of the labor market were more positive. The share of respondents reporting that jobs were “plentiful” increased by 0.3 percentage points, while those who saw jobs as “hard to get” fell by 1.8 percentage points. Consumers were more pessimistic about the short-term outlook. While the share of respondents expecting business conditions to improve rose from 14.0% to 14.3%, those expecting business conditions to deteriorate increased from 16.9% to 17.6%. Similarly, expectations of employment over the next six months were less favorable; The share of respondents expecting “more jobs” decreased by 0.2 percentage points to 13.9%, and those anticipating “fewer jobs” increased by 0.7 percentage points to 18.2%. The Conference Board also reported the share of respondents planning to buy a home within six months. The share of respondents planning to buy a home increased to 4.9% in March. Of those, respondents planning to buy a newly constructed home remained at 0.3%, and those planning to buy an existing home climbed to 2%.

Consumer Confidence Remains Stable Despite Concerns About Future2024-03-26T16:18:31-05:00

Fed Holds Steady, Sees Stronger Growth


The Federal Reserve’s monetary policy committee held the federal funds rate constant at a top target of 5.5% at the conclusion of its March meeting. The Fed will continue to reduce its balance sheet holdings of Treasuries and mortgage-backed securities as part of quantitative tightening and balance sheet normalization. Marking a fifth consecutive meeting holding the federal funds rate constant, the Fed continues to set the ground for rate cuts later in 2024. With inflation data moderating (albeit at a slower pace) and economic growth coming in better than forecast, the Fed’s future expectations for rate cuts stands at three (25 basis point cuts) in the central bank’s forecast for 2024. NAHB’s forecast continues to call for just two rate cuts during the second half of 2024 due to lingering inflation pressure and solid GDP growth conditions. Nonetheless, an ultimately lower federal funds rate will reduce the cost of builder and developer loans and help moderate mortgage rates headed into 2025. The Fed made several upgrades to its economic outlook for the March report. The forecast for 2024 GDP growth increased from 1.4% to 2.1%. The Fed also increased its more theoretical long-run growth estimate for the economy from 2.5% to 2.6%. This suggests that the economy is more capable than previously estimated of handling higher interest rates in the years ahead (this is a measure of the so-called “neutral rate”). All in, there was not a lot new for the March decision reporting. Markets and forecasters expected no change for Fed policy today. And equity and bond markets had already priced in expectations of stronger than expected growth via higher stock prices and a 10-year Treasury rate holding near 4.3%, a gain of more than 30 basis points since the start of the year despite forecasts for gradual declines by the end of 2024. The NAHB Economics team’s focus continues to be on the interplay between Fed monetary policy and the shelter/housing inflation component of overall inflation. With more than half of the overall gains for consumer inflation due to shelter over the last year, increasing attainable housing supply is a key anti-inflationary strategy, one that is complicated by higher short-term rates, which increase builder financing costs and hinder home construction activity. For these reasons, policy action in other areas, such as zoning reform and streamlining permitting, can be important ways for other elements of the government to fight inflation.

Fed Holds Steady, Sees Stronger Growth2024-03-20T14:16:34-05:00

U.S. Economy Ends 2023 With Surprisingly Strong Growth


The U.S. economy grew at a surprisingly strong pace in the fourth quarter, mainly fueled by resilient consumer spending. However, the fourth quarter data from the GDP report suggests that inflation is cooling. The GDP price index rose 1.5% for the fourth quarter, down from a 3.3% increase in the third quarter. The Personal Consumption Expenditures (PCE) Price Index, which measures inflation (or deflation) across various consumer expenses and reflects changes in consumer behavior, rose 1.7% in the fourth quarter, down from a 2.6% increase in the third quarter. According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) increased at an annual rate of 3.3% in the fourth quarter of 2023, following a 4.9% gain in the third quarter. It marks the sixth consecutive quarter of growth. This quarter’s growth was higher than NAHB’s forecast of a 0.9% increase. For the full year, real GDP increased 2.5% in 2023, up from a 1.9% increase in 2022, and slightly better than NAHB’s forecast of 2.4%. This quarter’s increase in real GDP reflected increases in consumer spending, exports, government spending, and private domestic investment. Imports, which are a subtraction in the calculation of GDP, increased 1.9%. Consumer spending, the backbone of the U.S. economy, rose at an annual rate of 2.8% in the fourth quarter, reflecting increases in both services and goods. While expenditures on services increased 2.4% at an annual rate, goods spending increased 3.8% at an annual rate, led by other nondurable goods (+5.1%) and recreational goods and vehicles (+10.9%). Both federal government spending and state and local government spending increased in the fourth quarter. The increase in state and local government spending primarily reflected increases in compensation of state and local government employees and investment in structures, while the increase in federal government spending was led by nondefense spending. In the fourth quarter, exports rose 6.3%, reflecting increases in both goods and services. Nonresidential fixed investment increased 1.9% in the fourth quarter, following a 1.4% increase in the third quarter. The increase in nonresidential fixed investment reflected increases in intellectual property products (2.1%), structures (3.2%), and equipment (1.0%). Additionally, residential fixed investment (RFI) rose 1.1% in the fourth quarter, down from a 6.7% increase in the third quarter. This is the second straight gain after nine consecutive quarters of declines. Within residential fixed investment, single-family structures rose 11.6% at an annual rate, multifamily structures declined 1.0%, and improvements rose 5.5%. ‹ New Home Sales Bounce Back in December on Lower Mortgage RatesHousing Share of GDP Inched up In the Fourth Quarter of 2023 ›Tags: economics, gdp, inflation, macroeconomics, macroeconomy, residential fixed investment

U.S. Economy Ends 2023 With Surprisingly Strong Growth2024-01-25T12:15:53-06:00

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