One step forward, one step back, is the economic pace the news flow has described for 2009’s second quarter. This week’s releases also show little net progress: consumers have lost some of the confidence gained in the past two months, retail is weak, and corporate layoffs are expected well into the second half. But in the one step forward department, April’s housing prices managed month-to-month increases in nine out of 20 markets (although they still fell for the U.S. as a whole).
One of the greenest economic shoots in May was a pickup of consumer spirits, but today, with The Conference Board’s June report, we gave that progress back. From an index level of 55 last month, consumer confidence slipped to a rating of 49. Still gloomy, perhaps, but better than April, however, and the best level since October.
Here’s what the waning index numbers are made up of:
[Consumers] claiming business conditions are “good” decreased to 8.0 percent from 8.8 percent, while those saying conditions are “bad” increased to 45.6 percent from 44.5 percent. Consumers’ assessment of the labor market was also less favorable. Those stating jobs are “hard to get” increased to 44.8 percent from 43.9 percent. Those saying jobs are “plentiful” decreased to 4.5 percent from 5.8 percent.
The perkiest consumers are concentrated in the Mountain and West South Central regions.
Executive outplacement consultants Challenger, Gray & Christmas warn of continuing heavy layoffs, predicted by the firm’s survey of CEOs:
There have been some promising signs in the economy, including increased confidence among consumers and businesses. However, until there is actually an increase in spending by these groups, the economy will continue to struggle. Even if the situation stabilizes, we could continue to see heavy monthly totals in excess of 100,000 job cuts.
But Challenger’s release came out before the June consumer confidence report, and this morning’s equally weak snapshot of retail sales from the International Council of Shopping Centers. Same-store sales rose 1.6 percent, the biggest weekly gain in six months, and year-over-year comparisons turned positive. However, that is still a weak retail sector, especially if more layoffs are coming.
On to the steps forward: home prices! According to the S&P Case-Shiller index for April, home prices once again fell 18 percent year-to-year, about as much as they have for the last eight months.
And declines are still picking up steam in five markets: Charlotte, New York, Cleveland, Portland (Oregon), and Seattle. The first three have only recently moved into the double-digit decreases the rest of the country has seen for over a year. Prices now stand at the levels of June 2003. Please click the graphic for a bigger image:
But in nine of the 20 markets in the C-S index, prices rose from month to month. And not in the flat-on-their-backs, dead-cat-bounce markets of Las Vegas and Phoenix, but instead in healthier regions such as Atlanta, Denver, Chicago and Boston.
S&P reminds us that the second quarter is a seasonally strong period for home sales, and I point out that a number of 2009’s positive markets were strong in the same months a year ago. But let’s hope we’re headed in the right direction.
Update July 1
Here is the optimistic and eloquent take of The Economist’s Free Exchange on the April Case-Shiller numbers:
It’s good news, though times will continue to be difficult in home markets for some time to come. A large number of new purchases, particularly in the major bubble markets, are foreclosure or otherwise distressed sales. And while a bottom in home prices will likely bring a flood of buyers into the market hoping to buy at the lowest price available, it will also bring “shadow inventory” online—homes for sale by owners who had been waiting for markets to level off. In markets with large existing inventory, the dynamic will probably favour renewed downward pressure on prices.
“Normal” conditions may not obtain for years, especially in the most overbuilt cities. But this release is a clear cause for optimism.
