Morning indicator releases for the US showed significant divergence as housing reported in the Case-Shiller Index fell while Consumer Confidence rose. Markets are greeting the news positively with equities up nearly two percent early in the trading session. Meanwhile, currencies are reacting differently to the news with further dollar weakness against the majors. The Euro had been in the process of retracing below 1.39 but has since moved back toward 1.40 following the releases.
[B]The S&P/Case-Shiller housing index[/B] came in at 139.99, a fall from the previous 143.10, to levels not seen since 2003. The twenty city index posted a smaller annualized contraction in the previous month of 18.63% from 19.01% and economists polled by Bloomberg had expected the index to continue to narrow in March by 18.30%. Today’s release of a larger than expected fall to 18.70% raises concern that economic recovery will be prolonged by a severe housing market. Seasonally adjusted data for the national index showed the pace of declines accelerating to 6.92% in the first quarter from 6.62% in the fourth.
[B]Consumer Confidence[/B] as released by the Conference Board continued to rise for the third month to the highest level since the financial crisis escalated in September. The figure posted at 54.90 in May from a revised previous reading of 40.8; economists had expected a slight increase to 42.6. Consumers remain uneasy on the state of the economy but expectations run high on the hope of success in the fiscal stimulus and significant monetary easing measures. The expectations figure jumped to 72.3 from 51.0, the highest in more than a year, while present situation showed a small increase to near January levels.
While the release is on the whole positive, several indicators within the broad measure should be watched for concern. The percentage of those citing bad business conditions in the present increased to 45.3% from 44.9% while employment readings continue to worsen. Such weakness was however tempered by hope in the hope in expectations for the next six months which showed expectations for better business conditions rising and optimism that the job market will begin to improve. Consumers planning to buy automobiles in the next six months rose to 5.5% from 4.9%, the highest in over a year, while those planning to buy applicances also rose to 28.7% from 26.0%. Increased consumer spending in durable goods will help the manufacturing sector recovery and may limit job cuts in the months ahead.