WASHINGTON (Reuters) – U.S. consumer confidence rose in February as households were slightly more optimistic about the job market amid falling new COVID-19 infections and expectations of extra money from the share government to help the economy recover from the pandemic.
The Conference Board survey on Tuesday also showed that consumers were preparing for vacations abroad, although fewer intended to purchase homes, automobiles and other big-ticket items at home. over the next six months. Consumers also expected inflation to rise. This is in line with economists’ predictions that demand will return to goods services by the summer as more Americans get vaccinated, and increase price pressures.
There are fears in some quarters that a very accommodating fiscal and monetary policy will trigger inflation this year. Federal Reserve Chairman Jerome Powell played down those fears, citing three decades of lower and stable inflation.
On Tuesday, Powell told lawmakers the U.S. central bank will keep interest rates low and continue to pump money into the economy through bond purchases at least at the current rate until that we make substantial further progress towards our goals … which we don’t really have. made.
The Conference Board said its consumer confidence index rose to 91.3 this month from 88.9 in January. Confidence remains well below its high reading of 132.6 last February.
Economists polled by Reuters expected the index to rise to 90. The survey deadline was Feb. 11 and did not fully capture the winter storm, which cut power in Texas, or the easing of meal. restrictions in New York.
With more budget relief coming and better progress on the vaccination front, sentiment is expected to rise further, said Ryan Sweet, senior economist at Moodys Analytics in West Chester, Pa. As collective immunity approaches, the rejected claim will be released.
COVID-19 cases in the United States have declined for the sixth week in a row, with daily cases and hospitalizations falling to the lowest level since before the Thanksgiving and Christmas holidays. The pace of vaccination is also accelerating.
Health experts have warned, however, that the coronavirus variants initially discovered in Britain, South Africa and Brazil could spark another wave that threatens to reverse recent positive trends. The virus has claimed more than 500,000 lives in the United States just over a year since the pandemic hit the country. President Joe Bidens’ $ 1.9 trillion recovery plan after the pandemic is gaining traction in the U.S. Congress.
Wall Street stocks fell as investors sold mega-cap growth stocks due to valuation concerns. The dollar gained against a basket of currencies. US Treasury prices were higher.
Chart: Consumer confidence –
The survey’s current condition measure, based on consumers’ assessment of current business and labor market conditions, rebounded to 92.0 after declining for three consecutive months, indicating that a recovery in economic growth was underway. Retail sales surged in January, prompting economists to increase their growth estimates for the first quarter to an annualized rate of 6%, from as low as 2.3%.
Yet consumers remain cautious. The expectations index based on consumers’ short-term outlook for income, activity and labor market conditions slipped to 90.8 from 91.2 in January.
So-called differential labor market surveys, derived from data on respondents’ opinions about whether jobs are plentiful or hard to come by, hit a reading of 0.7 this month from -2.5 in January . This measure is closely linked to the unemployment rate in the labor departments employment report and has raised hopes for steady employment growth this month.
The economy created just 49,000 jobs in January after cutting 227,000 jobs in December, the first drop in payrolls in eight months. About 12.3 million of the 22.2 million jobs lost during the pandemic have been recovered.
The share of consumers expecting an increase in their income fell to 15.2% from 15.8% last month. The proportion forecasting a decline fell to 13.2% from 15.5% in January.
There has been an increase in the share of consumers planning to go on vacation in the next six months, but mostly abroad. Fewer consumers expected to buy homes, automobiles and major appliances. Consumer inflation expectations over the next 12 months climbed to 6.3% from 6% in January.
We believe the change in expectations reflects the real feeling that consumers are facing higher rates of inflation than those that appear to be captured in the CPI, said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
The moderation in home buying intentions is likely indicative of a slowdown in sales, which has been fueled by demand for more spacious homes for home offices and schools. Higher prices against a backdrop of tight supply could also slow home sales.
Another report released on Tuesday showed that the S&P CoreLogic Case-Shiller home price index in 20 metropolitan areas climbed 10.1% in December from a year ago, the largest increase since April 2014, after increasing 9.2% in November.
Strong house price inflation was confirmed by a third report showing that the Federal Housing Finance Agency’s (FHFA) house price index jumped 11.4% year-on-year in December after rising by 11.1% in November. Prices accelerated 10.8% in the fourth quarter from a year earlier, double the 5.4% recorded in the same period in 2019.
Reporting by Lucia Mutikani, edited by Franklin Paul and Andrea Ricci
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