US consumer confidence blips down
US consumer confidence blips down
By Daniel Pimlott in New York
Copyright The Financial Times Limited 2006
Published: October 31 2006 17:32 | Last updated: October 31 2006 17:32
Consumer confidence fell as American workers became more concerned about job availability and the state of the economy, despite the sharp fall in energy prices. Meanwhile, pay and benefits grew at their fastest rate in two years between July and September, raising inflation concerns.
The consumer confidence index slipped to 105.4, down from an upwardly revised level of 105.9 in September. Economists had expected the index to hit 108 this month.
Consumers’ assessment of present conditions was less favorable in October than a month earlier. Those claiming conditions were “bad” rose to 17.1 per cent from 15.6 per cent.
Views of present labour market conditions were also less positive. Consumers saying jobs were “plentiful” declined to 25.8 per cent from 26.2 per cent. Those claiming jobs were “hard to get” increased to 22.0 per cent from 20.9 per cent in September. The outlook for the jobs market was mixed with some expecting more and some expecting fewer jobs to be available in the months ahead.
“October’s dip in confidence was prompted by consumers’ mixed assessment of present-day business conditions and a less favourable view of the job market,” said Lynn Franco, Director of The Conference Board Consumer Research Center, which conducts the survey.
The data is good deal weaker than expected and comes in the face of a series of other consumer confidence indicators which have shown that consumers have a more positive outlook on the state of the US economy at the moment. Energy prices have fallen sharply since the summer, while interest rates have been kept steady after a prolonged period of consecutive rises and stock prices have risen, all factors which would be expected to improve consumers’ hopes for the future.
“It is tempting to blame the realisation that housing is sinking fast for the relative softness of the numbers but one month does not make a trend,” said Ian Shepherdson, chief US economist at High Frequency Economics. “Still, if the drop in gas prices and the rise in stock prices really is having so much less effect than history suggests, something else must be worrying consumers.”
The lower than expected confidence figure raises further questions over whether falling house prices or lower energy costs will determine future levels of consumer spending, argued Alan Ruskin, chief currency strategist at RBS Greenwich Capital.
“The consensus is that the latest confidence data hints at limitations to the positive energy impact on future personal consumption expenditures, and the jobs breakdown ... only reinforces concern that the economy remains at risk to a softer consumption-employment dynamic taking hold,” he said.
But others questioned the reliability of the data. The lower than expected level of the index could be because it is less sensitive to price movements in energy than other measures, said Mike Englund, chief economist for Action Economics. “It seemed to be less affected than other measures in the summer by high commodities prices, and it seems to benefiting less now as energy prices have fallen,” he said. “We have enough evidence from other consumer confidence surveys suggesting the contrary. We have to write it off as a fluke.”
In other data there was evidence of continuing tightness in the labour market. Pay and benefits rose at the fastest rate in two years between July and September, according to data released by the Labor Bureau, suggesting an increasing threat from inflation which may worry the Federal Reserve.
Total compensation costs rose by 1.0 per cent in the third quarter of the year, up from 0.9 per cent in the three months from March, the Employment Cost Index showed. It was also above the 0.9 per cent economists had been expecting.
Wages and salaries rose 0.9 per cent, while benefit costs were up 1.1 per cent. In the private sector, both numbers were a tenth lower, but state and local government employees saw wages jump 1.4 per cent, while benefit costs rose 1.5 per cent.
“Certainly the increase in the growth of top level total compensation costs will garner some attention at the next meeting of the Federal Reserve’s FOMC,” said Brian Bethune, US economist at Global Insight.
“However, to the extent that the acceleration in private industry costs is entirely due to an outsized gain in benefit costs in the third quarter, while actual wages and salaries decelerated, the FOMC should not be unduly perturbed by this report.”
By Daniel Pimlott in New York
Copyright The Financial Times Limited 2006
Published: October 31 2006 17:32 | Last updated: October 31 2006 17:32
Consumer confidence fell as American workers became more concerned about job availability and the state of the economy, despite the sharp fall in energy prices. Meanwhile, pay and benefits grew at their fastest rate in two years between July and September, raising inflation concerns.
The consumer confidence index slipped to 105.4, down from an upwardly revised level of 105.9 in September. Economists had expected the index to hit 108 this month.
Consumers’ assessment of present conditions was less favorable in October than a month earlier. Those claiming conditions were “bad” rose to 17.1 per cent from 15.6 per cent.
Views of present labour market conditions were also less positive. Consumers saying jobs were “plentiful” declined to 25.8 per cent from 26.2 per cent. Those claiming jobs were “hard to get” increased to 22.0 per cent from 20.9 per cent in September. The outlook for the jobs market was mixed with some expecting more and some expecting fewer jobs to be available in the months ahead.
“October’s dip in confidence was prompted by consumers’ mixed assessment of present-day business conditions and a less favourable view of the job market,” said Lynn Franco, Director of The Conference Board Consumer Research Center, which conducts the survey.
The data is good deal weaker than expected and comes in the face of a series of other consumer confidence indicators which have shown that consumers have a more positive outlook on the state of the US economy at the moment. Energy prices have fallen sharply since the summer, while interest rates have been kept steady after a prolonged period of consecutive rises and stock prices have risen, all factors which would be expected to improve consumers’ hopes for the future.
“It is tempting to blame the realisation that housing is sinking fast for the relative softness of the numbers but one month does not make a trend,” said Ian Shepherdson, chief US economist at High Frequency Economics. “Still, if the drop in gas prices and the rise in stock prices really is having so much less effect than history suggests, something else must be worrying consumers.”
The lower than expected confidence figure raises further questions over whether falling house prices or lower energy costs will determine future levels of consumer spending, argued Alan Ruskin, chief currency strategist at RBS Greenwich Capital.
“The consensus is that the latest confidence data hints at limitations to the positive energy impact on future personal consumption expenditures, and the jobs breakdown ... only reinforces concern that the economy remains at risk to a softer consumption-employment dynamic taking hold,” he said.
But others questioned the reliability of the data. The lower than expected level of the index could be because it is less sensitive to price movements in energy than other measures, said Mike Englund, chief economist for Action Economics. “It seemed to be less affected than other measures in the summer by high commodities prices, and it seems to benefiting less now as energy prices have fallen,” he said. “We have enough evidence from other consumer confidence surveys suggesting the contrary. We have to write it off as a fluke.”
In other data there was evidence of continuing tightness in the labour market. Pay and benefits rose at the fastest rate in two years between July and September, according to data released by the Labor Bureau, suggesting an increasing threat from inflation which may worry the Federal Reserve.
Total compensation costs rose by 1.0 per cent in the third quarter of the year, up from 0.9 per cent in the three months from March, the Employment Cost Index showed. It was also above the 0.9 per cent economists had been expecting.
Wages and salaries rose 0.9 per cent, while benefit costs were up 1.1 per cent. In the private sector, both numbers were a tenth lower, but state and local government employees saw wages jump 1.4 per cent, while benefit costs rose 1.5 per cent.
“Certainly the increase in the growth of top level total compensation costs will garner some attention at the next meeting of the Federal Reserve’s FOMC,” said Brian Bethune, US economist at Global Insight.
“However, to the extent that the acceleration in private industry costs is entirely due to an outsized gain in benefit costs in the third quarter, while actual wages and salaries decelerated, the FOMC should not be unduly perturbed by this report.”
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