Black and White Program

Some economic indicators suggest growing strength

September 27th, 2012 by Steven Barnes

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Several informational reports point towards a strengthening economic picture. Looking at report data from July, indicators point to the sixth straight month in which U.S. home prices rose, indicating housing market recovery that seems to be sustainable. The rise in prices is accompanied by reports of increased home sales and new groundbreaking on properties that also rose in August. The Standard & Poor’s (S&P) /Case Shiller composite index is a closely watched barometer of U.S. Housing of 20 metropolitan areas, and rose 0.4 percent in July, considering a seasonally adjusted basis (non-adjusted basis, prices were up 1.6 percent). June’s advance was 0.9 percent, therefore making the July gain a bit disappointing increase, but none-the-less, an increase. Prices in the 20 cities were up 1.2 percent since last year, (only four cities had lower prices), representing the biggest gain since August 2010.

If the housing market continues its growth, it is expected that it will also provide substance to U.S. economic growth (1.7% for 2nd QTR), although that is not expected to occur until next year. The housing price lift also provides a much needed psychological benefit to consumers, as it helps calm fears of a continued housing slump and return to a recession. Dampening down that lift a bit are still tough mortgage lending and qualifications standards, as well as problematic foreclosures and underwater homes. The U.S. Federal Reserve’s very aggressive stimulus program started in August, in which it will buy $40 billion in mortgage-backed securities a month until the job market and economic conditions improve. Some analysts believe this policy will be the defining one that changes the pace of the economy and one which will be looked upon years from now as the game changer that resolves the anemic economic growth the U.S. has experienced for the past two year period. The Fed’s announcement moved mortgage interest rates to new record lows last week. In an additional piece of positive economic news, consumer confidence climbed in September to the highest level in seven months as well. Industry group The Conference Board said its index of consumer attitudes rose to a reading of 70.3 from an upwardly revised 61.3 in August, indicating the highest level since February of 2012. Since consumer spending accounts for two-thirds of economic activity, this indicator that conveys an upbeat and positive attitude is a good barometer for future spending plans and purchase activity. Additionally, consumers expressed more optimism on both the current and short-term outlook for the labor market and a more favorable view on their income prospects in the next six months.

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