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U.S. consumer confidence improves as COVID-19 cases fall; house prices accelerate By Reuters

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© Reuters. FILE PHOTO: Outbreak of the coronavirus illness (COVID-19) in New York City

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By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer confidence elevated in February, with households barely extra upbeat concerning the labor market amid declining new COVID-19 infections and expectations for extra cash from the federal government to assist the economic system’s restoration from the pandemic.

The survey from the Conference Board on Tuesday additionally confirmed customers warming as much as abroad holidays, although fewer supposed to buy properties, vehicles and different big-ticket gadgets over the following six months. Consumers anticipated greater inflation as effectively. This suits in with economists’ predictions that demand will swing again to providers from items by summer season as extra Americans get vaccinated, and enhance value pressures.

There are considerations in some quarters that very accommodative fiscal and financial coverage will ignite inflation this yr. Federal Reserve Chair Jerome Powell has performed down these fears, citing three a long time of decrease and steady inflation.

On Tuesday, Powell advised lawmakers that the U.S. central financial institution would maintain rates of interest low and proceed to pump cash into the economic system by bond purchases “at least at the current pace until we make substantial further progress towards our goals … which we have not really been making.”

The Conference Board mentioned its consumer confidence index rose to a studying of 91.3 this month from 88.9 in January. Confidence stays effectively beneath its lofty studying of 132.6 final February.

Economists polled by Reuters had forecast the index nudging as much as a studying of 90. The closing date for the survey was Feb. 11 and didn’t absolutely seize the winter storm, which knocked out electrical energy in Texas, or the easing of eating restrictions in New York metropolis.

“With additional fiscal relief coming and better progress on the vaccination front, sentiment should rise further,” mentioned Ryan Sweet, a senior economist at Moody’s (NYSE:) Analytics in West Chester, Pennsylvania. “As we approach herd immunity, pent-up demand will be released.”

COVID-19 cases within the United States have declined for the sixth consecutive week, with day by day cases and hospitalizations falling to the bottom stage since earlier than the Thanksgiving and Christmas holidays. The tempo of vaccination can also be selecting up.

Health specialists have warned, nevertheless, that coronavirus variants initially found in Britain, South Africa and Brazil might unleash one other wave that threatens to reverse the current constructive traits. The virus has claimed greater than 500,000 lives within the U.S. simply over a yr because the pandemic hit the nation. President Joe Biden’s $1.9 trillion restoration plan from the pandemic is gaining traction within the U.S. Congress.

Stocks on Wall Street fell as buyers bought off mega-cap progress shares on valuation considerations. The greenback gained versus a basket of currencies. U.S. Treasury prices had been greater.

Graphic: Consumer confidence – https://graphics.reuters.com/USA-STOCKS/nmopazdgdva/consconf.png

CAUTION LINGERS

The survey’s current scenario measure, based mostly on customers’ evaluation of present enterprise and labor market situations, rebounded to a studying of 92.0 after declining for 3 straight months, indicating a pick-up in financial progress was underway. Retail gross sales surged in January, prompting economists to spice up their first-quarter progress estimates to as excessive as a 6% annualized fee from as low as a 2.3% tempo.

Still, customers stay cautious. The expectations index based mostly on customers’ short-term outlook for revenue, enterprise and labor market situations slipped to 90.8 from a studying of 91.2 in January.

The survey’s so-called labor market differential, derived from information on respondents’ views on whether or not jobs are plentiful or onerous to get, rose to a studying of 0.7 this month from -2.5 in January. That measure carefully correlates to the unemployment fee within the Labor Department’s employment report and raised hopes for regular job progress this month.

The economic system created solely 49,000 jobs in January after shedding 227,000 jobs in December, the primary decline in payrolls in eight months. About 12.3 million jobs of the 22.2 million misplaced throughout the pandemic have been recovered.

The share of customers anticipating a rise in revenue dipped to fifteen.2% from 15.8% final month. The proportion anticipating a drop fell to 13.2% from 15.5% in January.

There was an uptick within the share of customers planning to go on trip over the following six months, however largely abroad. Fewer customers anticipated to buy properties, motor autos and main family home equipment. Consumers’ inflation expectations over the following 12 months shot as much as 6.3% from 6% in January.

“We believe the change in expectations reflects a real sense that consumers are facing higher inflation rates than appear to be being captured in the CPI,” mentioned Conrad DeQuadros, senior financial advisor at Brean Capital in New York.

The moderation in house-buying intentions possible factors to a slowdown in gross sales, which have been powered by demand for extra spacious lodging for residence workplaces and education. Higher prices amid tight provide might additionally sluggish residence gross sales.

A separate report on Tuesday confirmed the S&P CoreLogic Case-Shiller 20-metro-area house value index soared 10.1% in December from a yr in the past, the biggest acquire since April 2014, after growing 9.2% in November.

Robust house value inflation was confirmed by a 3rd report displaying the Federal Housing Finance Agency (FHFA) house value index jumped 11.4% year-on-year in December after rising 11.1% in November. Prices accelerated 10.8% within the fourth quarter from a yr earlier, double the 5.4% logged in the identical interval in 2019.

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