U.S. consumer confidence rose moderately in January while lingering concerns about the COVID-19 pandemic led to a further deterioration in households’ perceptions of the labor market, raising the risk of a second straight month of job losses.
But the survey from the Conference Board on Tuesday showed consumers more than willing to buy homes and automobiles in the next six months, indicating that the housing market and manufacturing industry will continue to underpin the economy.
“The slow rollout of the vaccines and the still-raging pandemic continue to depress consumer confidence despite the prospect of further fiscal aid and a brighter health situation,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics in New York.
The Conference Board’s consumer confidence index increased to a reading of 89.3 this month from 87.1 in December. The slight gain likely reflected nearly $900 billion in additional pandemic relief provided by the government at the end of December, which lifted consumers’ near-term expectations.
The was no indication that the Jan. 6 storming of the U.S. Capitol by former President Donald Trump’s supporters had impacted on confidence. The cut-off date for the survey was Jan. 14. Economists poll had forecast the index little changed at 89 in January.
The survey’s present situation measure, based on consumers’ assessment of current business and labor market conditions, fell to a reading of 84.4 from 87.2 in December. The expectations index based on consumers’ short-term outlook for income, business and labor market conditions increased to 92.5 from a reading of 87.0 in December, suggesting households foresee conditions improving in the near term.
President Joe Biden has unveiled a $1.9 trillion recovery plan from the pandemic. The new Biden administration has pledged to speed up and simplify the distribution of vaccines.
More than 25 million people have been infected by the virus, with the death toll over 420,000 since the pandemic started in the United States in early 2020. About 6% of the U.S. population has so far been vaccinated. Economists said though Biden’s rescue plan was facing resistance from some lawmakers, that was unlikely to derail the recovery from the pandemic.
“It is not likely we will see any household and business subsidy plan passed before March or April,” said Joel Naroff, chief economist at Naroff Economics in Holland Pennsylvania. “That should be early enough to get us through the year, even if there are significant cuts to the subsidies.”
U.S. stocks were little changed. The dollar slipped against a basket of currencies. U.S. Treasury prices were lower.
LABOR MARKET STILL SHAKY
The survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, deteriorated to a reading of -3.2 this month from -1.9 in December. That measure closely correlates to the unemployment rate in the Labor Department’s employment report.
The economy shed jobs in December for the first time in eight months.
“Jobs are harder to get or not as plentiful for a second month in a row and we will see if this means a second month of negative payroll jobs is in store for the markets in the report for January due out next Friday,” said Chris Rupkey, chief economist at MUFG in New York.
The share of consumers expecting an increase in income decreased to 14.4% from 15.7% last month. The proportion anticipating a drop declined to 14.2% from 14.6% in December.
More consumers expected to purchase homes and motor vehicles in the next six months. Though buying plans for major household appliances were little changed, more expected to purchase refrigerators and washing machines.
The pandemic has disproportionately affected lower-wage earners mostly in the services industry. It has fueled a migration from city centers to suburbs and other lower-density areas as Americans seek more space for home offices and schooling. Record-low mortgage rates are also boosting the housing market.
But supply is failing to keep up, leading to a surge in house prices, which economists and realtors warn could put homeownership out of the reach of many first-time buyers. A separate report on Tuesday showed the S&P CoreLogic Case-Shiller 20-metro-area house price index jumped 9.1% from a year ago in November after rising 8.0% in October.
Robust house price inflation was corroborated by a third report showing the Federal Housing Finance Agency (FHFA) house price index surged a seasonally adjusted 11.0% year-on-year in November after increasing 10.3% in October.
The FHFA’s index is calculated by using purchase prices of houses financed with mortgages sold to or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac.
“Demand for homes remains strong and with inventories at historic lows, home prices will likely continue to accelerate over coming months, until supply can catch up,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York.