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Americans continued to feel confident about the economy this month, a good sign for consumer spending and economic growth.

The Conference Board, a business research group, says its consumer confidence index rose to 125.4 in January from a revised 123.1 in December.

Read: CPI data point to ‘hotter price growth’ for Canada: economist

The business research group’s index measures consumers’ assessment of current conditions and their outlook for the next six months. Their view of today’s conditions slipped slightly, but their expectations for the future rose.

Economists watch the Conference Board report closely because consumer spending accounts for about 70% of U.S. economic output.

“Consumers remain quite confident that the solid pace of growth seen in late 2017 will continue into 2018,” says Lynn Franco, the Conference Board’s director of economic indicators.

Read: Country of the month: China

Consumer spending rose at a 3.8% annual pace from October through December last year, the fastest pace since the spring of 2016. But Americans haven’t been getting big pay raises, so they’ve had to dip into savings. The Commerce Department reports that the savings rate dropped to 2.4% of after-tax income in December, the lowest since September 2005.

“They’re spending a lot more, but they are going into debt and saving less to do so,” says Robert Frick, economist with the Navy Federal Credit Union. “There has to be a reckoning at some point.” Either wages will rise faster, he adds, or consumers will curb spending and put more money into savings or investments.

Less supply pushes home prices up in November

U.S. home prices rose a sharply in November, lifted by a shortage of homes on the market.

Standard & Poor’s says its S&P CoreLogic Case-Shiller national home price index increased 6.2% in November from a year earlier after climbing 6.1% in October.

Read: How mortgage rules will impact market

Seattle saw 12.7% price increase, Las Vegas 10.6% and San Francisco 9.1%. Washington D.C. prices rose just 3.3%, lowest among the 20 metropolitan areas measured.

The national housing index has registered annual gains of 5% or more for 16 months.

David Blitzer, chairman of the index committee at S&P Dow Jones Indices, notes that housing construction is running well below historical levels. “Without more supply, home prices may continue to substantially outpace inflation,” he says.

Originally published on Advisor.ca
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