Data Soft But Growth Trend Persists
By Wayne Cole
NEW YORK (Reuters) - Reports on U.S. consumer confidence (news - web sites), manufacturing in the Chicago region and home sales all fell short of analysts' high expectations on Tuesday, though overall, the picture was still one of solid growth.
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Perhaps most troubling was that consumers reported jobs were harder to get even as most economists are hoping for a decent rise in non-farm payrolls this month.
"The important factor for consumer confidence going forward will be the labor market," said Elisabeth Denison, an economist at Dresdner Kleinwort Wasserstein. "The jobs-hard-to-get index (in the consumer confidence survey) edged higher, a sign the recovery in labor markets is slow."
The data were a disappointment to financial markets, which have become used to a diet of upside surprises in recent months. Blue chip stocks ended modestly lower, though they chalked up hefty gains on Monday that lifted the main stock indexes to highs for the year.
The dollar, meanwhile, plumbed new depths against the euro and only Treasuries found anything to cheer as the data reinforced expectations the Federal Reserve (news - web sites) would be in no hurry to tighten its super-loose monetary policy.
JOBS, JOBS, JOBS
The Conference Board (news - web sites)'s measure of consumer confidence dipped to 91.3 in December from an upwardly revised 92.5 in November, leaving it just below analysts' forecasts of 91.5. All the deterioration came in the current conditions measure, while respondents were more optimistic on the future.
The percentage of consumers saying jobs were hard to get climbed to 32.6 percent in December, reversing a decline to 29.6 percent the month before, suggesting people are not yet convinced the "jobless recovery" has turned for the better.
That unease, however, did not stop consumers from celebrating Christmas in style.
Chain store sales climbed 2.0 percent in the week to Dec. 27, the International Council of Shopping Centers and UBS said in a joint report. The improvement was confirmed by the Redbook measure of chain store sales, which accelerated by 3.9 percent year-on-year last week from 2.9 percent the previous week.
The last-gasp splurge was helped by the growing popularity of gift certificates, perhaps suggesting Dad actually got something he wanted this year.
The good cheer was spread unevenly, with some retailers such as Target (NYSE:TGT - news) reporting sales at the low of projections for the month. But overall, the figures suggest private consumption remained fairly decent in December, if not quite as bounteous as retailers had hoped.
Indeed, recent revisions to personal spending data have put consumption on a higher trajectory than first thought and encouraged some analysts to revise up their forecasts for GDP (news - web sites) growth this quarter from 3.0 percent to 4.0 percent or more.
DOWN BUT FAR FROM OUT
On the downside, November home sales suggested housing would not make as big a contribution to economic growth as in the last quarter. Sales of existing homes fell 4.6 percent to an annual pace of 6.06 million in November, short of market forecasts of 6.30 million.
Stephen Stanley, an economist at RBC Greenwich Capital Markets, noted some perspective was in order.
"On the one hand, this is the weakest reading since June. However, it is the fifth-highest reading on record," he said.
"The bottom line is that, as with new home sales in November, it appears that housing demand has cooled modestly from this summer's unsustainably torrid pace but remains incredibly strong by any reasonable standard," he said.
Much the same reaction greeted a report on manufacturing in the Chicago area. The Chicago purchasing management index slipped to 59.2 in December, below an anticipated pullback to 62.2 after November's jump to a nine-year high of 64.1.
"The Chicago PMI was weaker than expected, but it's still a solid showing for the manufacturing sector," said Michael Moran, chief economist at Daiwa Securities America.
"It's at the upper end of the historical range. I would not call this a weak number by any means," he added. |
