Skip to main content

The S&P CoreLogic Case-Shiller 20-city home price index rose 2 per cent in August from a year earlier.

Rick Bowmer/The Associated Press

U.S. consumer confidence fell for a third straight month in October amid concerns about the short-term outlook for business conditions and job prospects, but remained at levels consistent with continued growth in consumer spending.

Other data on Tuesday suggested lower interest rates were lending some support to the struggling housing market. Contracts to purchase previously owned homes jumped in September to their highest level in nearly two years and house prices increased solidly in August. A stabilizing housing market could underpin consumer spending, which is the economy’s growth engine.

“We see nothing in today’s report to suggest consumers will pull the rug out from the economy with a reduction in their purchases that could slow the economy to a crawl,” said Chris Rupkey, chief economist at MUFG in New York. “Consumer spending is likely to remain moderate going into 2020.”

Story continues below advertisement

The Conference Board said its consumer confidence index slipped to a reading of 125.9 this month from an upwardly revised 126.3 in September. The index was previously reported at 125.1 in September. It was 12 points lower than its reading in October last year.

Economists polled by Reuters had forecast it rising to 128.0 in October. The survey’s present situation measure, based on consumers’ assessment of current business and labour market conditions, increased to 172.3 this month from 170.6 in September. But the expectations index drawn from consumers’ short-term outlook for income, business and labour market conditions declined to 94.9 from 96.8 last month.

The survey was published as officials from the Federal Reserve began a two-day policy meeting. The Fed is expected to cut interest rates for the third time on Wednesday. The U.S. central bank cut rates in September after reducing borrowing costs in July for the first time since 2008.

Consumer confidence has been declining, largely blamed on a 15-month trade war between the United States and China, which has thumped business sentiment, leading to a decline in capital expenditure that has contributed to a downturn in manufacturing. Still the confidence index remains relatively high.

“In the past, confidence declined steadily when the economy was headed toward recession,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “The index would need to be around 110 before it would send a stronger recession signal.”

The dollar was trading lower against a basket of currencies, while U.S. Treasury prices rose. Stocks on Wall Street were mostly higher.

MIXED LABOUR MARKET READINGS

The Conference Board survey’s so-called labour market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, increased to 35.1 in October from 33.5 in September. That measure closely correlates to the unemployment rate in the Labor Department’s employment report.

Story continues below advertisement

The share of consumers expecting more jobs in the months ahead fell to 16.9% this month from 17.6% in September, while those anticipating fewer jobs rose to 17.8% from 15.4%.

Consumers’ buying plans were mixed in October. Plans to buy a home increased, but were little changed for major appliances. This would suggest a limited rebound in retail sales in October after they dropped in September for the first time in seven months.

Consumer’s intentions to buy a home were supported by a separate report on Tuesday from the National Association of Realtors showing its Pending Home Sales Index, based on contracts signed last month, advanced 1.5% to a reading of 108.7, the highest since December 2017.

Economists surveyed by Reuters had forecast pending home sales rising 0.9% in September. Pending home contracts become sales after a month or two, and last month’s increase suggested a rebound in existing home sales, which declined 2.2% in September. Pending home sales surged 3.9% in September from a year ago.

“It looks like the drop in mortgage rates relative to late last year has helped boost activity in the housing market,” said Daniel Silver, an economist at JPMorgan in New York. “We think there will be additional increases in existing home sales in upcoming reports.”

But a chronic shortage of homes for sale is constraining the housing market despite the lower mortgage rates. Builders continue to complain that a lack of land and labour is making it difficult to break more ground especially on homes priced below $200,000, which are most sought after.

Story continues below advertisement

In September, home purchase contracts increased 2.6% in the populous South. Contracts rose 3.1% in the Midwest. They declined 1.3% in the West and fell 0.4% in the Northeast.

Separately, the S&P CoreLogic Case-Shiller national house price index increased 3.2% from a year ago in August after rising 3.1% in July. That was the first year-over-year acceleration in the rate of home price growth since March 2018. “Persistently low mortgage rates have seemingly ended what might have otherwise been a home price race-to-the-bottom this late in our economic expansion,” said Ralph McLaughlin, deputy chief economist at CoreLogic.

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter
To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies