By Courtney Schlisserman and Bob Willis
Dec. 29 (Bloomberg) -- Confidence among U.S. consumers improved in December for a second month as Americans grew less concerned about the immediate future, pointing to an economy that will keep expanding into 2010.
The Conference Board’s sentiment index increased to 52.9 in December, in line with the median forecast of economists surveyed by Bloomberg News, according to figures from the New York-based research group today. Another report showed home prices climbed in October for a fifth consecutive month.
Attitudes about current conditions decreased to the lowest level in 26 years and wage expectations also fell, a reminder that the worst employment slump in the post-World War II era has shaken consumers. Gains in home and stock prices are helping households recover some of the record $17.5 trillion plunge in wealth, which may help sustain spending next year.
“We’re going to need a more definitive improvement in the labor market before confidence improves more than it has,” said Michael Moran, chief economist at Daiwa Securities America Inc. in New York, who forecast a rise to 53 for confidence. “The housing numbers are encouraging, but apparently they’re not having much influence on consumer attitudes. Consumers are focusing more on the job market than the housing market.”
Stocks fell for the first time in seven days as declines in energy, financial and technology companies wiped out earlier gains. The Standard & Poor’s 500 Index decreased 0.1 percent to close at 1,126.2.
Prices Improve
Retailers such as Toys “R” US Inc. are among those extending discounts beyond Christmas to lure customers.
“We are going to be very aggressive, we’ve been aggressive all season,” Toys “R” Us Chief Executive Officer Jerry Storch said by telephone Dec. 23 from Wayne, New Jersey, where the largest U.S. toy chain is based.
The S&P/Case-Shiller index of home prices in 20 U.S. cities rose 0.4 percent in October from the prior month on a seasonally adjusted basis, the group said today. The gauge was down 7.3 percent from October 2008, the smallest year-over-year decline since October 2007.
Economists surveyed by Bloomberg News forecast the confidence measure would increase to 53, according to the median of 64 projections, from a previously reported 49.5 in November. Estimates ranged from 46 to 56.5.
The group’s index averaged 45.2 this year, the lowest annual rate since records began in 1967. The measure averaged 58 in 2008 and 103.4 in 2007.
Job Market
The Conference Board’s measure of present conditions decreased to 18.8, the lowest level since February 1983, from 21.2 the prior month. Fewer people said jobs are plentiful, while the proportion of those who said jobs are hard to get also decreased.
The gauge of expectations for the next six months climbed to 75.6, the highest since the recession began two years ago, from 70.3 the prior month.
The share of people who expect their incomes to rise over the next six months decreased, while more Americans anticipated employment will improve.
“If consumers are worried about income, they’re not going to be out there spending a whole lot,” said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania. “The economy is moving forward, but not at a particularly great pace.”
A jobless rate that is forecast to exceed 10 percent through the first half of next year may prompt policy makers and retailers to maintain tax breaks and incentives to entice buyers.
Buying Plans
Consumer buying plans for automobiles and real estate dropped this month, today’s Conference Board report showed. Home-buying expectations fell to the lowest level since 1982.
“It’s clear that consumer concerns about unemployment levels and the economic climate are weighing on spending,” Walgreen Co. Chief Executive Officer Gregory Wasson said on a conference call with analysts Dec. 21. “Consumers are focused on value and discretionary items.”
To help ensure housing doesn’t weaken again, President Barack Obama and Congress last month extended a tax credit for first-time buyers until April 30 from Nov. 30, and expanded it to include some current owners.
A surge in home purchases by first-time U.S. buyers is doing little to help real estate agents and brokers who close the deals.
Fewer Commissions
Commissions in 2009 fell to the lowest level in seven years, driven down by sales of low-priced homes to first-time buyers using the federal tax credit. Commissions through November dropped 6.2 percent from a year earlier to $40.6 billion, according to Bloomberg calculations based on the average commission rates from Real Trends Inc. and on home price and sales data from the National Association of Realtors.
The S&P/Case-Shiller report showed prices in 11 of the 20 areas covered increased on a seasonally adjusted basis compared with the prior month, while eight had a decline. The biggest month-to-month gain was in San Francisco, which climbed 1.7 percent.
All of the 20 cities in the S&P/Case-Shiller index showed a smaller year-over-year decline than in September.
“We’re starting to get a little bit of a turnaround, things are stabilizing,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “People aren’t in a panic in terms of selling their homes.”
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Traderone: These consumers' barometers seem to fluctuate like the stock market - up and down.
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