Consumer confidence, led by high hopes for the housing markets, has recovered from its doubts in the wake of the government shutdown last fall and is starting the new year on a tear.
Two weeks ago economists at the Conference Board forecasted that for the year as a whole growth will accelerate markedly to 2.9% in 2014 from the subdued 1.9% pace in 2013. “The robust gains in household net worth, fueled by the 29% gain in equity prices and 16% rise in median home prices, boosted consumer spending to a robust 4% pace in Q4 2013,” they wrote and set a goal of 1.11million housing starts this year, up from .92 million in 1013.
“On the labor front, we look for companies to continue to add to their payroll count at a sustained and healthy pace of around 200,000 per month. This along with the ongoing retirement of baby boomers from the workforce should allow the unemployment rate to continue falling at a rapid clip,” they wrote.
The first returns of the new year support their predictions. The Conference Board Consumer Confidence Index®, which had rebounded in December, increased again in January. The Index now stands at 80.7 (1985=100), up from 77.5 in December. The Present Situation Index increased to 79.1 from 75.3. The Expectations Index increased to 81.8 from 79.0 last month.
“Consumer confidence advanced in January for the second consecutive month,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of the present situation continues to improve, with both business conditions and the job market rated more favorably. Looking ahead six months, consumers expect the economy and their earnings to improve, but were somewhat mixed regarding the outlook for jobs. All in all, confidence appears to be back on track and rising expectations suggest the economy may pick up some momentum in the months ahead.”
Housing professionals are watching consumer trends closely as they prepare for the coming spring market. With inventories still low and uncertain interest rates raising questions about buyer demand, decisions buyers and sellers are making now could shape sales and price trends for the coming season—and the whole year to come.