{"id":1668,"date":"2020-02-25T11:19:09","date_gmt":"2020-02-25T16:19:09","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1668"},"modified":"2020-02-25T11:19:09","modified_gmt":"2020-02-25T16:19:09","slug":"february-consumer-confidence-and-december-home-prices","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1668","title":{"rendered":"February Consumer Confidence and December Home Prices"},"content":{"rendered":"\n

KEY DATA:<\/strong> Confidence: +0.3 point;\nPresent Situation: -8.8 points; Expectations: +6.4 points\/ FHFA (Month): +0.6%;\nOver-Year: 5.2%\/ Case-Shiller (Month): +0.5%; Over-Year: +3.8%<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cConsumers remain confident, but continued\ndeclines in the equity markets are likely to test their resolve.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:  <\/strong>The markets are beginning to\nface reality but for most of the last couple of months, investors have\ngenerally paid little attention to the potential impact on the U.S. and world\neconomies.  Thus, with equity prices generally\nrising and the labor market solid, it was hardly a surprise that the Conference\nBoard\u2019s Consumer Confidence Index rose in February.  Yes, the gain was less than expected, but the\nlevel remains high.  <\/em><\/strong>That said,\nthere was a real warning in the data: The Present Situation index fell sharply.<\/em><\/strong>  That offset a jump in expectations.  The likelihood is that U.S. growth will\nmoderate over the next few months and if the stock market doesn\u2019t bounce back\nquickly, then both components could decline.<\/em><\/strong>  Consumers are going to spend decently, but\ntheir broad shoulders are likely to start slumping.<\/p>\n\n\n\n

Home prices rose sharply in December and it looks\nlike the decelerating price pattern is turning around.  Both the Case-Shiller and Federal Housing\nFinance Agency\u2019s national price indices were up solidly at the end of last\nyear. <\/em><\/strong> The big difference was in the gain for the\nyear.  The FHFA number was significantly\nhigher than the Case-Shiller rise.  If we\naverage the two, the increase was moderate and sustainable, which is what you\nwould expect in an economy that is expanding moderately.  But there is a concern.<\/em><\/strong>  Price gains have been decelerating for at least\ntwo years and that is in a market where there is an immense supply shortage.<\/em><\/strong>  Prices in more areas should be rising\nfaster.  If the economy slows more than\nexpected, we could see price increases fade significantly.    <\/em><\/strong>MARKETS AND FED\nPOLICY IMPLICATIONS:<\/strong> Well, I have been asking for weeks when or even if\ninvestors would wake and smell the antiseptic and it looks like that finally\nhappened yesterday.  The idea that \u201cwhat\nhappens in China stays in China\u201d was always nonsensical<\/em><\/strong> and to hear\ntraders say they didn\u2019t think the epidemic could be this bad makes me think\nthat they have to get out of the trading pits once in a while \u2013 or maybe even\nonce. Markets are efficient; but they\ndon\u2019t have to be rational. In this case, some fear should have been built in\nbut it wasn\u2019t.  Thus, this is likely a\ncorrection, adjusting prices to better reflect the uncertainty that has been there\nall along. <\/em><\/strong> But when it comes to\nJerome Powell, corrections are not viewed as price resetting.  They represent a challenge to growth that has\nto be met head on with all the power of the Fed.  Dumb? \nYes, but that is how he acted at the end of 2018.  The huge equity price gains were not\nsupported by economic and earnings fundamentals and when the inevitable\ncorrection occurred, he turned into Chicken Little.  As the Fed members have been noting\nrecently, there is not a lot of ammunition left and the Fed is going to have to\nresort to non-interest rate strategies if a major slowdown occurs.  The worry I have is that Mr. Powell will\npanic again and use up the last of his key weapon, lower interest rates.<\/em><\/strong>  Once you hit about one percent, the reaction\nfunction to further rate cuts largely disappears.  If you have to go to one, you are probably headed\nto zero and you only go to zero when there is a crisis.  So, why would businesses or individuals increase\ntheir borrowing or investing when rates get that low?  Go me, but the Fed Chair seems to think they\nwill.  We have a long way to go before\nwe get even close to correction territory and it is hardly clear that will even\nhappen.  But given the Fed Chair\u2019s\nhistory, I don\u2019t have a lot of confidence the Fed will react in a manner that\nnot only provides short-term stability but also allows for longer-term policy\nflexibility. <\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: Confidence: +0.3 point; Present Situation: -8.8 points; Expectations: +6.4 points\/ FHFA (Month): +0.6%; Over-Year: 5.2%\/ Case-Shiller (Month): +0.5%; Over-Year: +3.8% IN A NUTSHELL:  \u201cConsumers remain confident, but continued declines in the equity markets are likely to test their resolve.\u201d WHAT IT MEANS:  The markets are beginning to face reality but for most of … Continue reading February Consumer Confidence and December Home Prices<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1668","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1668","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1668"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1668\/revisions"}],"predecessor-version":[{"id":1669,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1668\/revisions\/1669"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1668"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1668"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1668"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}