House price slump be damned – US consumers are at their happiest in eight months, according to data from the Conference Board released on Tuesday.
The Board’s index of consumer attitudes hit 54.9 in May from a revised 40.8 in April – the biggest one-month jump since April 2003. Per the Board’s statement (no permalink):
Continued gains in the Present Situation Index indicate that current conditions have moderately improved, and growth in the second quarter is likely to be less negative than in the first. Looking ahead, consumers are considerably less pessimistic than they were earlier this year, and expectations are that business conditions, the labor market and incomes will improve in the coming months. While confidence is still weak by historical standards, as far as consumers are concerned, the worst is now behind us.”
But is the worst really behind us? Consider this housing factoid from Ian Shepherdon, chief US economist at High Frequency Economics (H/T John Authers):
The Case-Shiller home price index fell 18.7% y/y in March, below the consensus -18.3% and unchanged from February. This is disappointing; we had hoped for a slowing in the rate of decline in the wake of the levelling-off in existing home sales after the post-Lehman drop. Before Lehman, prices were falling by just over 1% per month, but the pace picked up to 2% per mon-th by October. If anything, the latest numbers are even worse, with seasonally adjusted prices down 2.2% in March.
That imposes a loss of about $380B on the household sector, in just a month. Were this pace to continue, the loss of housing wealth this year
would be roughly equal to the entire GDP of China. The collateral base of the household sector is evaporating, and that means consumption will be very weak for the foreseeable future.
Related links:
The bull case shredded – FT Alphaville
A delinquent spike – FT Alphaville