By: Dr. Mike Campbell
Approximately 70% of American output is consumed within the nation. This is why consumer data and items such as new home construction provide key indicators of the health of the world’s largest economy. With the festive period, consumer sales usually show a strong performance towards the end of a year, partially because of increased seasonal spending but also since many non-seasonal goods are also discounted in end of year sales.
The Case-Shiller index of house prices showed that prices declined by 1% in October and that in some cities, prices have fallen to their lowest levels since 2006. Prices fell in all 20 of the cities included in the survey. The rate of decline has surprised analysts who had predicted a fall of 0.6%, in line with the previous month’s decline. The decline has resumed after a respite in spring and summer as a result of a first-time home buyer tax credit of $6000 which was available until April.
The consumer confidence index, produced by the Conference Board, declined to 52.5 in December from 54.3 a month earlier. To put this in context, the index would be about 90 in times of economic expansion. Again, analysts were taken by surprise by the data, having anticipated a modest increase to a value of 56.
The survey involves data from 5000 households and also reveals that it is becoming harder for people to find work if unemployed. The Conference Board are predicting that the US recovery will continue in 2011, but the pace will remain “moderate”. This is unlikely to see significant inroads made into getting the nation’s unemployment level down from its current 9.8%.
On a brighter note, Mastercard report that retail and service sales were upp by 5.5% in the run-up to Christmas compared to the 2009 figures.