The U.S. economy is showing signs of improvement, with key indicators pointing to a rebound in consumer confidence, a moderation in inflation expectations, and a continued surge in house prices.
Consumer Confidence on the Rise
Consumer confidence, a key measure of consumer sentiment, rose in November after three straight monthly declines. The Conference Board Consumer Confidence Index increased to 102 in November from 99.1 in October. This suggests that consumers are becoming more optimistic about the economic outlook, which could boost consumer spending in the coming months.
Inflation Expectations Fall
Consumers’ inflation expectations also eased in November. The University of Michigan’s 12-month inflation expectations fell to 5.7% in November from 5.9% in October. This suggests that consumers are becoming more confident that inflation is coming under control.
House Prices Continue to Accelerate
U.S. house prices continued to accelerate in 2023. According to the Federal Housing Finance Agency (FHFA), the median price of an existing single-family home in the United States rose by 12.6% in the 12 months ending in September, to $435,200. This is the highest annual increase in median home prices since the FHFA began tracking the data in 1991.
Overall, these indicators suggest that the U.S. economy is showing resilience in the face of headwinds such as rising interest rates and global economic uncertainty. While challenges remain, the recent data suggest that the economy is on a solid foundation.
U.S. Consumer Confidence Rose in November after three straight monthly declines
The Conference Board Consumer Confidence Index® increased to 102 in November from 99.1 in October. This represents a rebound from three consecutive months of decline, and is likely due in part to the start of the holiday shopping season.
The Present Situation Index, which measures consumers’ assessment of current business and labor market conditions, rose to 142.1 from 139.6. The Expectations Index, which measures consumers’ short-term outlook for income, business, and labor market conditions, also increased, to 77.6 from 73.9.
Despite the increase in confidence, consumers remain somewhat pessimistic about the future. The Expectations Index is still below 80, which is the level that historically signals a recession within the next year. However, the increase in confidence is a positive sign for the economy.
US house prices have continued to accelerate in 2023
According to the latest data from the Federal Housing Finance Agency (FHFA), the median price of an existing single-family home in the United States rose by 12.6% in the 12 months ending in September, to $435,200. This is the highest annual increase in median home prices since the FHFA began tracking the data in 1991.
There are a number of factors contributing to the rise in home prices. Low interest rates have made it more affordable to borrow money, and many buyers are competing for a limited supply of homes. Additionally, millennials are entering their prime homebuying years, and there is a growing demand for larger homes with more space.
However, experts warn that the housing market is becoming increasingly overheated, and that prices could start to fall in some areas. The FHFA forecasts that home prices will rise by 4.1% in 2024, and that the median price will reach $475,000.
Despite the potential for price declines, experts say that the overall housing market is still strong. There is a shortage of homes for sale, and demand is expected to remain strong in the coming years.
Here are some additional factors that could affect the housing market in 2023:
- The Federal Reserve: The Fed is expected to raise interest rates in 2023, which could make it more expensive for borrowers to get mortgages. This could cool the housing market, but it could also reduce the number of homes for sale.
- Economic growth: If the economy grows more slowly than expected, it could dampen demand for homes and slow the pace of price appreciation.
- Supply chain disruptions: Disruptions to the supply chain could continue to affect the availability of materials used to build new homes, which could limit supply and put upward pressure on prices.
Consumers’ 12-month inflation expectations fell to 5.7% in November from 5.9% in October
According to data from the University of Michigan, consumers’ 12-month inflation expectations fell to 5.7% in November from 5.9% in October. This is a positive sign, as it suggests that consumers are becoming more confident that inflation is coming under control.
The decline in inflation expectations is likely due to a number of factors, including the recent cooling of inflation data. The Consumer Price Index (CPI) rose by 0.6% in October, down from 0.9% in September. The CPI is a measure of the average change in prices for a basket of consumer goods and services.
The decline in inflation expectations is also likely due to the Federal Reserve’s aggressive interest rate hikes. The Fed has raised interest rates six times this year in an effort to slow the economy and bring inflation under control.
The decline in inflation expectations is good news for the economy, as it could help to keep inflation from becoming entrenched. However, it is important to note that inflation expectations are still relatively high. The 5.7% figure is still well above the Fed’s 2% target inflation rate.
The Fed is likely to continue to raise interest rates until it is confident that inflation is under control. This could lead to a slowdown in the economy, but it is necessary to prevent inflation from becoming a bigger problem.
