U.S. consumer confidence rose in February as households were slightly more optimistic about the job market amid a drop in new COVID-19 infections and expectations of more money from the government to help l economy to recover from the coronavirus pandemic.
The Conference Board survey on Tuesday also showed that consumers were preparing for vacations abroad, although fewer intended to purchase homes, automobiles and other big-ticket items at home. over the next six months. Consumers also expected inflation to rise. This is in line with economists’ predictions that demand will return to goods services by the summer, as more Americans get vaccinated, and further pressure on prices.
There are fears in some quarters that a very accommodating fiscal and monetary policy will trigger inflation this year. Federal Reserve Chairman Jerome Powell played down those fears, citing three decades of lower and stable inflation.
On Tuesday, Powell told lawmakers that the U.S. central bank would keep interest rates low and continue to pump money into the economy through bond purchases “at least at the current rate until. that we are still making significant progress towards our goals … which we have not really been. manufacturing”.
The Conference Board said its consumer confidence index rose to 91.3 this month from 88.9 in January. Confidence remains well below its high reading of 132.6 last February.
Economists polled by the Reuters news agency had predicted the index would reach 90. The deadline for the investigation was February 11 and did not fully capture the winter storm, which cut power in Texas, or the relaxation of restaurant restrictions. At New York.
“With more budget relief coming and better progress on the immunization front, sentiment is expected to increase further,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pa. “As herd immunity approaches, pent-up demand will be released.”
COVID-19 cases in the United States have declined for the sixth week in a row, with daily cases and hospitalizations falling to the lowest levels since before the Thanksgiving and Christmas holidays. The pace of vaccination is also accelerating.
Health experts have warned, however, that the coronavirus variants initially discovered in Britain, South Africa and Brazil could spark another wave that threatens to reverse recent positive trends. The virus claimed more than 500,000 lives in the United States, just over a year since the pandemic hit the country. President Joe Biden’s $ 1.9 trillion plan to recover from the pandemic is gaining traction in the US Congress.
Wall Street stocks fell as investors sold mega-cap growth stocks due to valuation concerns. The dollar gained against a basket of currencies. US Treasury prices were higher.
The survey’s current condition measure, based on consumers’ assessment of current business and labor market conditions, rebounded to 92.0 after declining for three consecutive months, indicating that a recovery in economic growth was underway. Retail sales surged in January, prompting economists to increase their growth estimates for the first quarter to an annualized rate of 6% from as low as 2.3%.
Yet consumers remain cautious. The expectations index based on consumers’ short-term outlook for income, business and labor market conditions slipped to 90.8 from 91.2 in January.
The survey’s so-called labor market differential, derived from data on respondents’ opinions about whether jobs are plentiful or hard to come by, fell to 0.7 this month from -2.5 in January. This measure is closely correlated with the unemployment rate found in the recent US Department of Labor employment report – and raised hopes for steady job growth this month.
The economy created just 49,000 jobs in January after cutting 227,000 jobs in December, the first drop in payrolls in eight months. About 12.3 million of the 22.2 million jobs lost during the pandemic have been recovered.
The share of consumers expecting an increase in their income fell to 15.2%, from 15.8% last month. The proportion forecasting a decline fell to 13.2% from 15.5% in January.
There has been an increase in the share of consumers planning to go on vacation in the next six months, but mostly abroad. Fewer consumers expected to buy homes, automobiles and major appliances. Consumer inflation expectations over the next 12 months soared to 6.3% from 6% in January.
“We believe the change in expectations reflects a real sense that consumers are facing higher rates of inflation than those that appear to be captured in the CPI [consumer price index]Said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
The moderation in home buying intentions is likely indicative of a slowdown in sales, which has been fueled by demand for more spacious homes for home offices and schools. Higher prices against a backdrop of tight supply could also slow home sales.
Another report released on Tuesday showed that the S&P CoreLogic Case-Shiller home price index in 20 metropolitan areas climbed 10.1% in December from a year ago, the biggest gain since April 2014, after increasing 9.2% in November.
Strong house price inflation was confirmed by a third report showing that the Federal Housing Finance Agency’s house price index jumped 11.4% year-on-year in December after increasing 11.4% 1% in November. Prices accelerated 10.8% in the fourth quarter from the previous year, double the 5.4% recorded during the same period in 2019.