US consumer confidence ebbs, house prices surge

US consumer confidence fell from more than a 17-year high in March amid stock market volatility, but households remained upbeat about labour market conditions, which could help to support consumer spending. The Conference Board said on Tuesday its consumer confidence index dropped 2.3 points to a reading of 127.7 this month from a slightly downwardly revised 130.0 in February, which was the highest level since November 2000. The index was previously reported at 130.8 in February.
"The stock market has been volatile and consumers don't like market volatility. The pullback in confidence is not a concern for the economic outlook this year," said Chris Rupkey, chief economist at MUFG in New York. "Still, we wonder if the decline in confidence means that the economy may have seen its best days already for this cycle." The Conference Board survey's so-called labour market differential, derived from data on respondents' views on whether jobs are plentiful or hard to get, increased to 25.0 in March, the strongest reading since May 2001, from 24.0 in February.
That measure, which closely correlates to the unemployment rate in the Labour Department's employment report, suggests that labor market slack continues to shrink. "This report combined with the March jobless claims data points to another 200,000-plus reading on payrolls in March, which we judge would push the unemployment rate down to 4.0 percent from 4.1 percent," said John Ryding, chief economist at RDQ Economics in New York.
The economy added 313,000 jobs in February. Labor market tightness has left economists optimistic that wage growth will soon pick up. That, together with lower income taxes, are expected to spur consumer spending in the coming quarters. Retail sales have declined for three straight months, leading economists to expect a slowdown in consumer spending in the first quarter. Consumer spending, which accounts for more than two-thirds of US economic activity, grew at a robust 3.8 percent annualized rate in the fourth quarter.
Rising house prices could also boost consumer spending. A separate report on Tuesday showed the S&P CoreLogic Case-Shiller composite index of home prices in 20 metropolitan areas increased 6.4 percent in the 12 months to January after rising 6.3 percent in December.