Economic Snapshot: Consumer confidence reaches pre-recession levels, modest increases in home sales

July’s consumer confidence index reached pre-recession levels but it would appear October’s reading has surpassed those numbers. Consumers’ confidence is coming back, even amid modest gains in new and pending home sales and a slightly volatile year for gross domestic product.

Consumer confidence

Consumer confidence surged in October, now reading at 94.5 versus 89.0 in September. This is the index’s highest reading since October 2007, surpassing the previous record-breaking numbers in July.

The percentage of consumers expecting business conditions to improve over the next six months rose from 19.0 percent to 19.6, while those expecting business conditions to worsen fell from 11.4 to 9.3.

Consumers are also optimistic about the labor market. Those anticipating more jobs in the coming months increased to 16.8 from 16.0, while those anticipating fewer jobs declined sharply from 16.9 percent to 13.9. Consumers who are expecting personal income growth also improved, from 16.9 percent to 17.7, and those expecting a drop in their income declined from 13.4 percent to 11.6.

Still, views of business conditions remain mixed. Though the number of consumers who considered conditions “good” rose slightly from 24.2 percent to 24.5, those who claimed conditions are “bad” also increased, from 21.2 percent to 21.7. 

New home sales

New home sales were at a seasonally adjusted rate of 467,000, 0.2 percent above the revised August rate of 466,000 and 17 percent above September 2013.

The median sales price of new single-family houses sold in September was $259,000 and the average sales price was $313,200. The estimate number of new houses for sale was 207,000 this month, representing a 5.3-month supply at the current sales rate that matches the existing home sales pace for September. The sales rate is at its strongest since July 2008.

At the end of September, 210,000 new homes were available for sale. Of those home, 50,000 of them were completed. The median rate of sales since completion of these homes was 3.1 months, relatively unchanged from August and from September 2013.

Pending home sales

Pending home sales saw a slight increase of 0.3 percent in September to 105.0. The index is above year-over-year levels for the first time in 11 months, 1.0 percent higher than September 2013. This index marked five consecutive months of readings above 100 and is the second-highest index since last September.

The Northeast index rose 1.2 percent to 87.5 this month, 2.9 percent above the previous year. The South climbed 1.4 percent to 118.5, now 1.7 percent above last September. While the index in the West decreased slightly 0.8 percent to 101.3, it is still 3.6 percent above last year. The index in the Midwest fall 1.2 percent to 101.2 in September and is 4.0 percent below the previous year.

However, improved housing conditions and low interest rates could not offset the tight credit conditions barring buyers. Fifteen percent of realtors in September reported having clients who could not obtain financing among their reasons for not closing a sale.

GDP

Real gross domestic product increased at an annual rate of 3.5 percent in the third quarter. This follows an expansion of 4.6 percent in the second quarter and a 2.1 percent contraction in the first quarter. GDP rose 2.3 percent in the same quarter in 2013.

Real final sales, a measurement of GDP that excludes changes to inventories, expanded at a rate of 4.2 percent. Exports rose 7.8 percent while imports fell 1.7 percent.

The price index for personal consumption expenditures rose 1.2 percent annually, down from the 2.3 percent increase last quarter. The core inflation rate was up 1.4 percent versus 2.0 percent in the second quarter.