June Home Prices, Consumer Confidence, Q2 GDP 2nd Estimate, Beige Book

House Prices Gain but Confidence Stumbles

  • The Case-Shiller 20-City House Price Index increased by 0.9 percent in June.
  • The Conference Board’s Consumer Confidence Index declined in August to 60.6 percent.
  • Real Gross Domestic Product growth for 2012Q2 was revised up to 1.7 percent in the second estimate.
  • The Fed’s Beige Book suggested modest growth across most regions and sectors in July/early August.

Data from Case-Shiller started the week off on a much-needed encouraging note, with home prices in the 20-City House Price Index increasing 0.9 percent in June, following a 1.0 percent increase in May. Of the 20 cities surveyed in June, 18 showed increasing prices. Charlotte and Dallas home prices declined by a hair, down just 0.1 percent for the month. A turning point in housing is visible across most major markets, with prices and sales improving, and construction increasing. In order to sustain the momentum in housing we will need to see at least slow-to-moderate job growth over the remainder of the year, and we will need to avoid a self-inflicted recession due to the Fiscal Cliff early next year.

The Conference Board’s Consumer Confidence Index, released yesterday, tumbled from 65.4 in July to 60.6 in August. The August reading marks the lowest index level since November 2011. According to the Index, consumer pessimism in August was driven by apprehension about business and employment prospects. As was widely expected, the second estimate of real GDP growth for 2012Q2 was revised up to 1.7 percent, primarily reflecting stronger personal consumption expenditures and exports. Although the upward revision was welcomed, sub-two percent growth is still uncomfortably close to stall speed for the U.S. economy. Next week’s release of August labor market data will be closely watched as an indication of whether or not growth will accelerate into the second half of 2012. Today’s Beige Book yielded little new insight into the direction of the economy over the first half of Q3. Economic activity was cited as expanding gradually in most regions and sectors. Retail spending and real estate markets were reported to be generally improving, with commercial real estate markets providing stability or lift to most markets. All 12 markets surveyed noted increases in home sales, home prices, or housing construction, adding anecdotal evidence to an accelerating housing recovery. The manufacturing sector provided a more mixed picture, as the 12 districts were split evenly between increasing and decreasing demand for manufactured goods.

Market Reaction: Equity markets are treading water heading into Labor Day. Treasury yields are leveling out. Oil is down to $95.14/barrel as Hurricane Isaac moves inland. Currency markets are stable as well.

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