WASHINGTON, Sept 26 (Reuters) – U.S. consumer confidence fell to its lowest level in four months in September, weighed down by persistent concerns about high prices and growing concerns about an economic recession, but household finances remained broadly optimistic about the labor market.
The second consecutive month of declines in confidence reported by the Conference Board on Tuesday also reflects concerns about rising interest rates and the political environment.
The country faces a potentially devastating federal government shutdown Saturday amid political controversy. Confidence declined across all age groups, most notably among consumers with annual incomes of $50,000 or more.
“While inflation has slowed, prices remain higher than they were before the pandemic, which is hurting consumer confidence,” said Christopher Rapkey, chief economist at FWDBONDS in New York.
According to the Conference Board, this month’s consumer confidence index was 103.0, the lowest level since May, from an upwardly revised 108.7 in August. Economists polled by Reuters had forecast that the index would fall to 105.5 from the previously announced 106.1. Consumer awareness of the possibility of a recession next year has increased again.
A sharp drop in expectations measures contributed to the drop in confidence, which economists say was partly due to the changes Congress will take to fund federal agency programs in the fiscal year that begins Oct. 1. He blames the impending government shutdown for his failure so far to pass a spending bill.
Hundreds of thousands of federal workers will be furloughed and a wide range of services, from economic reporting to nutrition benefits, will be suspended starting Sunday.
“Consumers also expressed concerns about the political climate and rising interest rates,” said Dana Peterson, chief economist at the Conference Board in Washington.
The deadline for the preliminary investigation was September 18th. Millions of Americans also began paying off student loans in October, with most using up their pandemic savings.
The survey revealed that consumers are increasingly concerned about their household finances.
Last week, the Federal Reserve kept its overnight policy interest rate unchanged at 5.25% to 5.50%. But the U.S. central bank has become more hawkish, predicting it will raise rates again by the end of the year and that monetary policy will remain much tighter than previously expected through 2024.
The Fed has raised its policy interest rate by 525 basis points since March 2022.
Although consumers continue to worry about rising costs of living, their inflation expectations for the year ahead remain stable and they do not intend to significantly reduce purchases of big-ticket items such as cars, televisions and refrigerators over the next six years. A few months.
But with interest rates on popular 30-year fixed mortgages at their highest in more than 22 years and home prices rising again, fewer people expected to buy a home.
Consumers’ 12-month inflation expectations remained flat for the third consecutive month at 5.7%.
Personal consumption continues to be supported by the tight labor market, and wage growth rates remain high.
The survey’s so-called labor market gap, derived from data on respondents’ views on whether jobs are plentiful or hard to get, widened to 27.3 this month compared to 26.7 in August. This indicator correlates with the unemployment rate, an employment report closely followed by the Department of Labor.
Stock prices on Wall Street fell. The dollar rose against a basket of currencies. US bond prices fell.
Housing price growth accelerates
After hitting a 17-month high in July, new home sales fell 8.7% to a seasonally adjusted annual rate of 675,000 units in August, according to a separate release from the Commerce Department.
Economists had predicted that new home sales, which make up a small portion of U.S. home sales, would fall to 700,000. New home sales are counted at the time of contract signing and are a leading indicator of the housing market. However, it can vary from month to month. Sales in August increased by 5.8% compared to the same month last year.
While new home sales continue to be supported by a lack of existing homes on the market, rising mortgage rates are reducing affordability for prospective home buyers.
Interest rates on 30-year fixed mortgages topped 7% in August and rose to an average of 7.19% last week, the highest level since July 2001, according to data from mortgage lender Freddie Mac. Mortgage interest rates have been rising in tandem with U.S. Treasury yields, which have soared on concerns that rising oil prices will hamper the Fed’s efforts to fight inflation.
Nancy Vanden Houten, chief U.S. economist at Oxford Economics, said: “We expect rising interest rates to have a negative impact on new home sales, but builders appear to be willing to expand their use of incentives to boost sales.” “We believe this is more resilient than existing home sales.” In New York.
Annual home price growth accelerated for the second consecutive month in July, largely reflecting tight supply in the existing housing market, according to the Federal Housing Finance Agency’s third annual report. House prices rose 4.6% in July compared to the same month last year, after rising 3.2% in June. Prices rose 0.8% month-on-month after rising 0.4% in June.
The recovery in home prices appears to be contributing to the rise in inflation, and likely provided cover for the Fed to maintain its hawkish stance for some time.
“I think the Fed will see the reacceleration in housing prices as a reason to keep interest rates steady for an extended period of time,” said Bill Adams, chief economist at Comerica Bank in Dallas. “While renters are seeing some relief in new lease prices, two-thirds of Americans are homeowners, so the Fed cannot afford to ignore the impact that home prices have on the cost of living. ”
Report by Lucia Mutikani. Additional reporting by Amina Niasse.Editing: Chizu Nomiyama, Andrea Ricci
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