Consumer confidence in December as measured by the Conference Board’s Consumer Confidence Index is rising again; it jumped 10 points to 110.7 from 101. Why should that be, with all the doom and gloom and geopolitical uncertainty bombarding us daily?
I think it’s because consumers are seeing falling prices and lower inflation, especially gasoline prices with average gas prices approaching $3 per gallon for the first time in years. And consumers continue to shop both online and in stores because they are finding more bargains, with retail sales surging.
“December’s increase in consumer confidence reflected more positive ratings of current business conditions and job availability, as well as less pessimistic views of business, labor market, and personal income prospects over the next six months,” said Dana Peterson, Chief Economist at The Conference Board.
And the unemployment rate has fallen back to 3.7 percent with more workers than ever joining the workforce. Why shouldn’t consumers’ temperaments improve?
“While December’s renewed optimism was seen across all ages and household income levels, the gains were largest among householders aged 35-54 and households with income levels of $125,000 and above.
This is also understandable as they comprise the largest percentage of the adult-age workforce with average hourly waging rising 4.0 percent—at least 1 percent above a falling inflation rate.
More good news is a recovery in the housing market. Single-family construction is soaring. Why? These adult-age consumers believe it’s time to own a home.
Overall housing starts increased 14.8 percent in November to a seasonally adjusted annual rate of 1.56 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
“The single-family starts figure is remarkably strong, and we would not be surprised to see this figure revised lower or fall back slightly in the next month, given the nearly 20 % rise in November,” said NAHB Chief Economist Robert Dietz. “NAHB is forecasting an approximate 4 % gain for single-family starts in 2024, as mortgage rates settle lower, economic growth slows and inflation moves lower.”
If I were the Fed Governors, I wouldn’t wait for inflation to drop further to begin to lower interest rates, I said last week. The inflation rate has been falling steadily for more than a year and we could be in a deflationary spiral. Sound impossible? It might happen if the Fed doesn’t see the writing on the wall.
Nobel Laureate Paul Krugman has been scolding certain economists of late in a NYTimes Op-ed who don’t believe what is happening.
“From an economic point of view, 2023 will go down in the record books as one of the best years ever—a year in which inflation came down amazingly fast at no visible cost, defying the predictions of many economists that disinflation would require years of high unemployment.”
The cost of living measured by the Consumer Price Index rose just 0.1 percent in November thanks to lower oil prices. Without food and gas prices, so-called core consumer prices rose a somewhat sharper 0.3 percent last month and matched the Wall Street forecast. And the annual rate of inflation slowed to 3.1 percent in November from 3.2 percent in the prior month, matching the lowest level since early 2021.
Consumers are starting to believe what they are experiencing, in other words. Gas prices are at the top of the list, but how about dining out?
There was a 11 percent increase in dining out sales, and Christmas may equal Thanksgiving as the highest travel month ever. Don’t consumers carry the most weight on which direction this economy is heading?
Harlan Green © 2023
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
No comments:
Post a Comment