WASHINGTON: US consumer confidence fell more than many predicted in April, fueled by a deterioration in expectations among over-55s and households with annual incomes over $50,000, according to survey data released Tuesday. The pessimistic results may ease some of the pressure on the Federal Reserve as it prepares to consider raising interest rates for the tenth time in a row next week in order to control rising prices.
The consumer confidence index fell in April to 101.3, down from a revised 104.0 in March, the Conference Board said in a statement. This was below the median forecast in a MarketWatch survey of economists. Consumers’ expectations "fell and remain below the level which often signals a recession looming in the short term,” Ataman Ozyildirim, senior director of economics at The Conference Board, said in a statement. "Compared to last month, fewer households expect business conditions to improve and more expect worsening of conditions in the next six months,” he said.
"They also expect fewer jobs to be available over the short term,” he added. Tuesday’s data release comes a week before the Fed meets to decide interest rates amid inflation which remains above its long-term target of two percent. In recent weeks, a few members of the Fed’s rate-setting committee have suggested that the US central bank should lift its benchmark lending rate next week.
The vast majority of futures traders expect the Fed will raise rates by a quarter point next week, according to data from CME Group. Consumer inflation expectations over the next 12 months remain "essentially unchanged” at 6.2 percent, Ozyildirim said.
Meanwhile, new home sales in the United States grew more than anticipated in March, the Commerce Department said Tuesday, as a lack of existing homes continued bolstering demand in the market for new properties. Sales of new single-family houses picked up 9.6 percent to an annual rate of 683,000 last month, seasonally adjusted, said the department.
The increase exceeded analyst forecasts, suggesting the market remains hotter than expected, while February’s rate was revised down to 623,000. The trend in new home sales has "massively outperformed” the level implied by mortgage demand since mid-2022, said Ian Shepherdson and Kieran Clancy of Pantheon Macroeconomics in a recent note.
"That, in turn, reflects the relative abundance of new home supply,” the economists added
The supply of new homes for sale could last a little over eight months, significantly more than trends in the existing home market, they said. New home sales in March remain 3.4 percent below than the same period a year ago, the Commerce Department said.
The median sales price of new houses sold in March was $449,800, up from February. The property sector—which is sensitive to interest rates—has been reeling as the Federal Reserve rapidly raised the benchmark lending rate rapidly since early 2022 to tackle high inflation. The new homes market is much smaller than that of existing homes in the country.
A US debt default would trigger an "economic and financial catastrophe,” Treasury Secretary Janet Yellen said in prepared remarks Tuesday, stressing that action to raise or suspend the debt limit should be "without conditions.” Her comments at an event in Washington come as the top congressional Republican vowed Sunday to hold a vote this week on lifting the debt ceiling and curbing spending—despite President Joe Biden’s calls to increase borrowing with no strings attached.
The United States hit its $31.4 trillion borrowing limit in January, prompting the Treasury to take extraordinary measures that allow it to continue financing the government’s activities. But if the debt ceiling is not raised or suspended by Congress before current tools are exhausted, the government risks defaulting on payment obligations as early as July, with profound implications for the economy. "In my assessment—and that of economists across the board—a default on our debt would produce an economic and financial catastrophe,” Yellen said in remarks Tuesday.
Among the potential consequences she listed were higher payments on mortgages, auto loans and credit cards, while businesses could see credit markets worsen. The federal government could also become unable to issue payments to millions of Americans including those who rely on Social Security, she said. Moody’s Analytics said in a note Monday that the plan proposed by Republican House Speaker Kevin McCarthy to raise the debt ceiling in exchange for cuts in government spending would slow growth and cut employment. If the draft presented by McCarthy on April 17 passed as is, it would bring a drop of 0.6 percentage points in US potential growth for 2024, and the elimination of 780,000 jobs, according to the ratings agency’s research arm. Unemployment would also be set to rise. —AFP