12/30/2014
By Jennifer Coombs

Consumer confidence as reported by the Conference Board was especially strong in the current conditions component, which gives an indication for strength in December’s consumer activity. The December consumer confidence index increased to a reading of 92.6 which, apart from October’s 94.1 reading, is the strongest of the recovery. In addition, November’s reading was revised up 2.3 points to 91. The current conditions component increased by 5.1 points to 98.6; which is a new recovery best. Showing much less of a punch was the expectations component, which declined to 88.5 in December from 89.3 in November. This weakness, in contrast to the strength of the current jobs assessment, is indicative of a fair amount of pessimism in the jobs outlook where 16.9% of those survived see fewer jobs ahead compared to 14.7% who see more positions opening up. One big negative of the report was a sizable decline in the number of those expecting to purchase a house in the next six months; this is particularly negative for home builders. All in all, the gain in current-conditions component points to an extension in the momentum of the consumer sector, thanks to a healthier jobs market and lower gas prices.

The housing slowdown saw home prices decline big-time, but although home demand is coming back, prices are not rising as fast as they should. Case-Shiller reported their 20-city index for the month of October, which showed that both the seasonally adjusted and unadjusted results came in softer than expected at +4.5%, down by 3 tenths from September. This is the lowest rate since October 2012 after the index saw low double digit gains for much of 2013 and into April 2014. However, the month-to-month reading on an adjusted basis is positive, showing a strong 0.8% gain which was primarily due to housing price gains in Atlanta, San Francisco, Tampa and Denver. The unadjusted rate, however, declined to -0.1% for a second straight month. Though unadjusted data are closely followed in this report, the adjusted monthly gain is quite significant and points to a shift higher ahead for the year-to-year rate.

Jennifer Coombs
Wall Street Strategies

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