August 19 Discouraging reports about the state of the U.S. economy seemed to arrive almost daily this week, with little evidence of any significant improvement being close at hand.
- Consumer Confidence
U.S. consumer confidence sank to its lowest ebb since the recession began, reported the Bloomberg Consumer Comfort Index.
The Index monthly expectations measure sagged to minus 34. The weekly measure of expectations fell to 48.2 at mid-month, the worst reading since mid-May.
Another monthly measure of consumer sentiment, The Conference Board Consumer Confidence Index, is expected to be released next week.
- Consumer Prices
The Consumer Price Index (CPI) surged 0.5% in July, according to the latest figures from the U.S. Bureau of Labor Statistics. Over the last 12 months, the all-items index has increase 3.6% before seasonal adjustment.
Much of the July increase came from increases in gasoline and food costs. Excluding food and energy, the CPI rose 0.2% for the month following a 0.3% increase in June.
Analysts said the price increases were largely the result of supply issues as opposed to stronger demand.
Initial jobless claims rose some 9,000 to 408,000 for the week ending August 13, the U.S. Department of Labor reported, which was more than forecast and the highest weekly increase in a month.
However, a longer-term view was more positive. The four-week average of initial jobless claims fell for the seventh week in a row to the lowest level since mid-April and August remained on track to a solid month-to-month improvement, analysts said.
The U.S. housing market remains severely depressed, according to the latest data.
July housing starts were down 1.5% below a surprisingly strong June, but 9.8% above the July 2010 rate, the U.S. Census Bureau reported. Single-family home starts were off 4.9% for the month.
July sales of existing homes also fell in July, but they remain, "notably higher than a year ago," says the National Association of Realtors. July sales fell 3.5% in July versus the previous month, Sales were 21% above the level of a year ago.
Housing affordability is a major factor in current sales, says Lawrence Yun, NAR chief economist, although tight credit continues to restrain sales.
"Affordability conditions this year have been the most favorable on record dating back to 1970, but many buyers are being held back because banks are offering financing to only the most highly qualified borrowers, ignoring a large share of otherwise creditworthy buyers," Yun said. "Those potential buyers represent the difference between an uneven recovery and a much more robust housing market that could stimulate additional economic activity and create jobs."
The National Association of Home Builders (NAHB) reported that affordability in the second quarter continued to hover near its highest level in more than 20 years, according to the NAHB/Wells Fargo Housing Opportunity Index (HOI)
The HOI indicated that 72.6 percent of all new and existing homes sold in the second quarter of the year were affordable to families earning the national median income of $64,200. The affordability measure dipped slightly from the record high of 74.6 percent set last quarter but remained above the 70 percent threshold initially achieved in the first quarter of 2009, said an NAHB news release.
Despite the latest news, many economists continue to forecast economic growth for the year, albeit at a slower rate than earlier this year, and for 2012.
This week, Moody's lowered its outlook for the U.S. economy, but the firm still forecasts nearly 2% real growth for 2011 and more than 3% next year. And The Conference Board Index of Leading Economic Indicators, considered a 3- to 6-month forecast for the economy, rose 0.5% in July after gaining 0.3% in June and 0.7% in May.