Consumer confidence and homesales lagged in December, but experts say a recovery is in full swing.
By Associated Press
Published December 31, 2003
NEW YORK - Anxiety about the job market is causing consumer confidence levels to dip, while housing sales also are slowing. But economists aren't worried - they say the outlook for improvement remains rosy, and the pullbacks are a normal kink in the economy's path to recovery.
The Conference Board reported Tuesday that its Consumer Confidence Index slipped to 91.3 in December, following a surge in November to a revised figure of 92.5, its highest level in more than a year. A retreat had been expected, although the latest number was below expectations; analysts had forecast the index would come in at 92.2.
By contrast, consumer confidence among Floridians increased between November and December. According to a similar study by economists at the University of Florida, the overall confidence index in Florida rose two points to 96, while optimism about short-term economic conditions rose five points to 97.
Florida survey director Chris McCarty said confidence is up particularly among households with $30,000 or more in annual income, "no doubt due in part to the clear gains in the stock market."
Also Tuesday, the National Association of Realtors reported that sales of previously owned homes declined by 4.6 percent in November to a seasonally adjusted annual rate of 6.06-million homes.
In Florida, existing single-family homes continue to change hands at a brisk clip, the Florida Association of Realtors said Tuesday. Florida homebuyers bought 10,322 houses in November, up 4.1 percent from the same time a year ago. The median sales price of those homes climbed even faster, rising 12.5 percent to $172,500.
The rate of growth was slower in Pinellas and Pasco counties, where sales of existing homes in November rose 2.3 percent, to 904, and the median price climbed 7.8 percent, to $148,700. November data for Hillsborough County, where the majority of Tampa Bay area home sales takes place, were not yet available.
Nationwide, 443,000 existing homes were sold in November, up 3.5 percent from the year before. The median price rose 5.9 percent, to $170,900.
The two national reports are closely watched because of the insight they provide into the mood of consumers. Consumer spending accounts for two-thirds of the economy, and a confident consumer is more likely to spend. Housing sales have held up overall despite the downturn because of low interest rates that have made mortgages more affordable.
Analysts said the reports did not mean the economic recovery was losing momentum. They noted that a year ago, the Consumer Confidence Index stood at 80.7, and that the newest data showed consumers are still feeling upbeat about the future. They also pointed out that housing sales had been expected to decrease and that even with the decline, sales of previously owned homes still registered their fifth best month on record and were poised to set a new record for all of 2003.
But the reports underscored two clouds hanging over the economic recovery: improving but still sluggish hiring and a housing market that may be losing steam after sustaining the economy through its long doldrums.
"A true recovery is finally under way, which is good. Two years into it and this is first time we can say that," said Jared Bernstein, an economist at the Economic Policy Institute. "At the same time, it's still a fragile one, and it still hasn't found strong legs."
"This is all part of a softening trend that had to occur because after we got such robust growth in the third quarter - growth that most people would agree was not sustainable," said Anthony Chan, chief economist at Banc One Investment Advisors in Columbus, Ohio. "I don't see anything in this that tells me that the recovery is in jeopardy, but I do think we will see a simmering down in the fourth and first quarters."
Meanwhile, Midwestern manufacturing continued its expansion this month, but at a slower pace than in November, according to the National Association of Purchasing Managers' Chicago office.
"All three were a little bit weaker than expected, basically," said Jan Hatzius, a senior economist at Goldman Sachs Group Inc., who called the "fairly substantial decline in labor markets" an "interesting and somewhat cautionary note."
Wall Street reacted cautiously to the reports. Stocks were mixed Tuesday in quiet trading ahead of the New Year's holiday weekend. The Dow Jones industrials closed down 24.96 at 10,425.04, while the Standard & Poor's 500 index advanced 0.16 to 1,109.64. The Nasdaq composite index, which closed above 2,000 for the first time Monday in nearly two years, rose 3.40 to 2,009.88.
Analysts said the December consumer confidence report showed that while consumers were nervous about their current circumstances, they were more optimistic about the future. The board's present situation index declined to 73.9 from 81.0, but its expectations index increased to 102.9 from 100.1.
The employment outlook also was higher, with 21.7 percent of those surveyed anticipating more jobs to become available in the next six months. Last month, that figure was 18.5 percent.
The Conference Board report is based on a survey sent to 5,000 households. The preliminary figures released Tuesday include responses from about 2,500 households. Those numbers will later be revised, when more of the surveys - usually about 3,500 - are returned. The consumer confidence index compares results to its base year, 1985, when it stood at 100.
The cutoff for the December report was Dec. 16, a day after fugitive fallen Iraqi leader Saddam Hussein was captured and so that had little effect on the indexes.
That sentiment may reflect a disconnect that Americans feel between the upbeat economic numbers trumpeted in the press and their own experiences, Bernstein said. The economy grew at a stellar 8.2 percent pace between July and September, but inflation-adjusted wages rose a scant 0.2 percent over that period and are expected to actually fall in the final months of 2003.
Job growth, while positive, has not been enough to drive up wages or alleviate employment anxieties, economists say. And that is likely to continue next year, as manufacturing and some service jobs move overseas, according to an economic assessment released today by retail bank Wachovia Corp.
Economists said it's also important to view the home sales report within the context of the past several months. Sales had been expected to slow toward the end of the year, and in fact they did in October and November after peaking in September.
"Although sales in November were off from recent peaks, last month's pace is a very respectable number," said David Lereah, the association's chief economist. "The market is being driven by low interest rates, a growing job market and a rising number of households."
- Times staff writer Scott Barancik contributed to this report. Information from the Washington Post was used in this report.
