The September Conference Board’s index on consumer confidence rose to 108 from 103.6 in August and that was above the estimate of 104.6. Thanks mostly to lower gasoline prices and a still good labor market, this figure is at the best since April. Both the Present Situation and Expectations rose m/o/m. One yr inflation expectations fell to 6.8% from 7%.
Those that said jobs are Plentiful rose 1.8 pts after dropping by 1.6 pts last month. Those that said they are Hard to Get fell .2 pts which is a 5 month low. The employment component improved by .4 pts to match a 5 month high. Of note, those expecting an Increase in Income was up 1.8 pts to the most since November 2021.
Spending intentions were mixed as they rose 1 pt for auto’s but fell a touch for homes. Plans for purchases of a major appliance was up 3.5 pts to a 5 month high.
Bottom line, as stated above, the drop in gasoline at the same time the labor market continues to hang in there and wage earners are seeing higher wages all combined for the lift in confidence. It bottomed at 85.7 in April 2020 and stood at 132.6 in February 2020. Thus, we’ve retraced about half of the covid decline.
Consumer Confidence
One yr Inflation Expectations
New home sales in August totaled 685k annualized, well better than the forecast of 500k and comes after the drop to 532k in July (revised up by 21k). Sales rose in all four main regions. With a slight uptick in homes for sale with the big boost in sales, months’ supply fell to 8.1 from 10.4 (long term average is 6). The very volatile median home price was up 8% y/o/y after a jump of 15% in July.
Bottom line, at the very end of July and into the first few weeks of August, the average 30 yr mortgage rate fell back below 5.50% from about 5.75-5.80% in most of July and almost 6% in mid June. While of course they are back above 6% again now, maybe that slight downtick resulted in more contract signings of new homes in August. Either way, with the mortgage rate now at 6.72% according to Bankrate, the August lift in new home sales is likely fleeting.
New Home Sales
After the negative prints seen in the NY, Philly, and Dallas manufacturing surveys and the +1 for KC, today the Richmond Fed said its regional index was zero but that was better than the estimate of -10. New orders and backlogs were negative for a 6th straight month. Cap ex spending though did rise m/o/m. Employment went to zero from +11 at the same time wages jumped 13 pts (while only one region, confirms what the Conference Board said). Finished goods inventories were still negative but went positive for raw materials. Prices paid and received both moderated again.
Expectations for Shipments 6 months out rose 3 pts after falling by 5 last month. The other internals were pretty mixed.
Bottom line, as seen so far with the regional manufacturing surveys, we have 3 in contraction and 2 flat lining. When we look at the first 3 quarters of 2022 (after Q3 gets reported next month), that will pretty much sum up the economy in that we are at best flat lining and at worst in a recession.
Richmond Mfr’g
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.