US consumer confidence reaches its highest level in 18 years; house prices slow down

WASHINGTON (Reuters) – US consumer confidence reached its highest level in 18 years in September, as households are more optimistic about the labor market, indicating continued strength despite an increasingly fierce trade dispute between the United States and the United States. United and China.

While other data on Tuesday showed a moderation in house price increases in July, gains would likely remain sufficient to boost household wealth and continue to support consumer spending, while making home buying a little more expensive. affordable for first time buyers.

"The consumer is always in charge of fanning the fires that drive the engines of economic growth, but the $ 1 million question is what will happen when commercial rates start to weigh," said Chris Rupkey. , chief economist at MUFG in New York.

The Conference Board said its consumer confidence index had risen to 138.4 this month from 134.7 revised up in August. This was the best reading since September 2000 and the index is not too far from a record of 144.7 that year.

Economists polled by Reuters had forecast that the consumer index would fall to 132.0 this month from 133.4 in August.

Consumer assessment of labor market conditions has improved markedly, even as the trade war between the US and China worsened, which economists say would lead to job losses and higher prices for consumers.

Washington imposed tariffs on Chinese goods worth $ 200 billion on Monday, and Beijing imposed tariffs on US $ 60 billion worth of goods. The United States and China had already imposed tariffs of $ 50 billion on their respective products.

For now, consumers seem to be ignoring trade tensions. Households have been optimistic this month about economic conditions over the next six months, many of them planning to buy appliances, motor vehicles and homes.

Some economists believe that a tighter labor market, which is starting to spur wage growth, and an increase in savings could provide a cushion to households against imports of more expensive consumer goods from China.

"In addition, consumers can choose to replace purchases of goods affected by tariffs by other goods and companies may choose to absorb higher costs," said Roiana Capital, economist at Berenberg Capital. Markets in New York.

STRONG WORK MARKET

The gap between the labor market and the Conference Board consumer survey, derived from data on respondents who think it is difficult to get a job and those who think the job is plentiful, is from 30.2 in August to 32.5 in September.

This measure, which is closely linked to the unemployment rate in the Department of Labor's employment report, indicates a further decline in the unemployment rate and weak labor market. The labor market is considered to be at or near full employment, with an unemployment rate of 3.9%.

The strength of the labor market, combined with the strength of the economy and the steady rise in inflation, convinced economists that the Federal Reserve would raise interest rates Wednesday for the third time this year.

The dollar weakened slightly against a basket of currencies, while US government bond yields rose. Stocks on Wall Street have changed little.

The consumer confidence report added to relatively upbeat data on consumer spending and the manufacturing sector, which suggested solid economic growth in the third quarter. Gross domestic product grew at an annualized rate of 4.2% in the second quarter. Growth estimates for the July-September quarter are above 3.0%.

While the economy in general is ahead, the housing market continues to lag, with signs that rising mortgage rates and housing prices are starting to weigh on demand.

Separately, S & P CoreLogic Case-Shiller's composite housing price index of 20 US metropolitan areas rose 5.9% in July from the previous year, after increasing 6.4% in June. .

Prices in the 20 cities edged up 0.1% in July compared with June, after adjusting for seasonal variations.

The moderation in house price inflation was also underlined by another report by the Federal Housing Finance Agency, which showed that the housing price index rose 0.2% in July after rising 0 , 3% in June.

The FHFA index is calculated using the purchase prices of mortgage-backed homes sold or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac.

"Consumers are raving, but are not discounting so much on house prices," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. "Increasing prices and mortgage rates reduce affordability and sales and this translates into slower price gains."