Consumer confidence continues to plummets as do housing prices in the United States, according to two studies unveiled this week. Does that mean the Federal Reserve’s repeated assertion of late that the economy continues to improve is false? That’s not necessarily the case.
The latest Consumer Confidence Index for March, tracked by The Conference Board, declined dramatically to a level of 63.4 from February’s reading of 72.0. A corresponding, forward-looking “Expectations Index” experienced an even bigger slide, from a level of 97.5 to March’s 81.1.
Granted, that was just hours before Standard & Poor’s/Case-Shiller Home Price Indices were released. Median home prices fell by a total of 1% among a grouping of the nation’s 20 largest housing markets. Moreover, 19 of the 20 markets (excluding Washington, DC) experienced losses between December and January,
Still, the Fed and numerous experts are sticking to their proclamations that a continued, albeit muted or mild, economic recovery period is still on. In fact, Economist Ken Goldstein, also with The Conference Board, told NACM the Fed indeed “is on target.”
“Consumers are less worried about how high the cost of filling up the gas tank or grocery cart has gotten; They are worried about how much more it will go up,” said Goldstein. “The second half of that worry is the very real fear that wage gains won’t match it. So the household budget is getting squeezed again. BUT, energy (utilities and gas) costs account for only about 5% of the household budget and food is perhaps twice that. In other words, the tail is wagging the dog here. These are more ‘nuisance taxes’ than a real hindrance for consumers.”
(Note: For the full version of this story including more analysis, check out our March 31 edition of eNews, available at nacm.org on Thursday afternoon).
Brian Shappell, NACM staff writer