The US economy continues to struggle as new data on Tuesday showed stagnant house prices and very weak consumer confidence, although there is still little sign of a spiral towards recession.
House prices were flat from June to July on a seasonally adjusted basis, according to the S&P Case-Shiller home price index, as the impact of foreclosures and unsold properties weighed on the housing market. Analysts had expected prices to edge up by 0.1 per cent as summer is traditionally a period of stronger demand in the housing market.
Separate figures showed no recovery in the Conference Board’s consumer confidence index in September. That is worrying because it suggests that fears created by August’s dispute over the debt ceiling and downgrade of the US credit rating have not faded.
The Case-Shiller index found that prices of single-family homes in the 20 largest US cities fell 4.1 per cent from a year ago – after a revised 4.4 per cent fall in June – which was better than the 4.4 per cent drop expected by economists. Prices fell in 18 of the cities, with only Detroit and Washington posting annual increases.
On an unadjusted basis, prices rose 0.9 per cent over the month, compared with a 1.2 per cent increase in June. Seventeen cities posted monthly increases, while prices in Denver were unchanged and Las Vegas and Phoenix recorded declines.
“This is still a seasonal period of stronger demand for houses, so monthly price increases are expected,” said David Blitzer, chairman of S&P’s index committee.
“While we have now seen four consecutive months of generally increasing prices, we do know that we are still far from a sustained recovery,” he said.
“Continued increases in home prices through the end of the year and better annual results must materialise before we can confirm a housing market recovery.”
While resales recorded strong monthly and yearly gains in August, the backlog of properties on the market remains high, a glut that has further depressed prices.
“Prices have stabilised in recent months thanks to the rebound in existing home sales between the fall of last year and the first quarter of this year,” said Ian Shepherdson, chief US economist at High Frequency Economics.
“But this effect will fade soon because sales have dropped back in recent months,” he added. “Either way, we expect to see price declines again by the autumn but we do not anticipate a renewed collapse.”
The Conference Board said its consumer confidence index was little changed at 45.4 compared with a revised 45.2 in August. The index, which is measured on a scale of 100, is generally more than 90 in a healthy economy.
“The pessimism that shrouded consumers last month has spilled over into September,” said Lynn Franco, Conference Board director.
Opinions about current conditions deteriorated for a fifth month in a row as fewer people said business conditions were good. The number of people saying jobs are hard to get rose to 50 per cent, the highest since 1983.
Consumers’ assessment about the next six months was slightly less grim, with fewer people saying conditions would worsen but fewer believing that conditions would improve. More Americans expected the job market to improve in the next six months, but fewer said they expected their incomes to increase.
“Consumers expressed greater concern about their expected earnings, a sign that does not bode well for spending,” Ms Franco said. Consumer spending accounts for about 70 per cent of the US economy.