Consumer confidence is returning from its recent lows over the past two months with it main index up 12.1 points for a 3-month high in May as the lockdowns ease in some states, said the Conference Board today. The above graph shows the differences in the four U.S. regions, with the South having the highest and Northeast the lowest confidence levels.
We are not sure if overall confidence will continue to rise and consumers consume again, however, because Dr. Fauci remarked Tuesday in congressional testimony that we could have as many as 100,000 infections per day in coming months from the 45,000 per day reported yesterday and today, as COVID-19 infection rates resurge with the openings that aren’t following CDC and NIH guidelines—that is, ignoring the mask wearing and social isolation requirements that would slow the spread of the pandemic.
This hasn’t stopped consumer confidence from rising to date as workers return to work and retail shops and businesses open again, says the Conference Board:
“Consumer Confidence partially rebounded in June but remains well below pre-pandemic levels,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The re-opening of the economy and relative improvement in unemployment claims helped improve consumers’ assessment of current conditions, but the Present Situation Index suggests that economic conditions remain weak.
“Looking ahead, consumers are less pessimistic about the short-term outlook, but do not foresee a significant pickup in economic activity. Faced with an uncertain and uneven path to recovery, and a potential COVID-19 resurgence, it’s too soon to say that consumers have turned the corner and are ready to begin spending at pre-pandemic levels,” said Franco.
Another sign of the uneven recovery is the 44 percent surge in pending home sales, which means the top 10-20 percent of income-earners that can afford to own a home aren’t doing so badly. The Pending Home Sales Index (PHSI), www.nar.realtor/pending-home-sales, a forward-looking indicator of home sales based on contract signings, rose 44.3 percent to 99.6 in May, chronicling the highest month-over-month gain in the index since NAR started this series in January 2001, though year-over-year contract signings are still down 5.1 percent.
Construction spending is also surging to meet the demand for more housing. During the first five months of this year, construction spending amounted to $543.2 billion, 5.7 percent (±1.2 percent) above the $513.7 billion for the same period in 2019.
“This has been a spectacular recovery for contract signings, and goes to show the resiliency of American consumers and their evergreen desire for homeownership,” said Lawrence Yun, NAR’s chief economist. “This bounce back also speaks to how the housing sector could lead the way for a broader economic recovery.”
Really? We have a long way to go, if that’s the case. Thursday’s unemployment report will probably show more improvement in the job formation picture from last month’s surprise 2.5 million increase, but that leaves us with some 20 million still unemployed and receiving continuing unemployment benefits; 30 million when state continuing claims are included.
NAR now expects existing-home sales to reach 4.93 million units in 2020 and new home sales to hit 690,000. “All figures light up in 2021 with positive GDP, employment, housing starts and home sales.” Yun noted that in 2021, sales are forecast to rise to 5.35 million units for existing homes and 800,000 for new homes, which means back to a normal sales rate.
Yet it’s becoming more obvious to me this could turn into a real depression lasting more than two quarters even though Automatic Data Processing Inc., a private payroll surveyor said today private-sector employers added 2.37 million jobs in June. Small employers added 937,000 jobs in June. Midsize companies added 559,000 jobs. And large businesses added 873,000. The services sector experienced a large gain in June, adding 1.9 million jobs.
Will the ‘official’ Labor Department employment report be enough to reassure consumers? Economists are predicting from 4 to 8 million workers will be called back to work. (It was actually 4.8 million jobs). But that survey was done before the latest coronavirus surge and rollbacks of openings in 13 states.
Harlan Green © 2020
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