The Conference Board’s Consumer Confidence Index declined in December as a result of concern about the fiscal cliff.
Of the three economic reports released on Thursday, only The Conference Board’s Consumer Confidence Index was negative. The report included a comment from Lynn Franco, Director of Economic Indicators at The Conference Board, to the effect that the sudden decline in consumer expectations was most likely caused by uncertainty surrounding the oncoming fiscal cliff. Because the report was released on a day when Senator Harry Reid’s remarks about the likelihood of an encounter with the cliff sent stock prices sinking, the concerns voiced by the survey participants appear to have been validated. Although economists had been anticipating a decline to 70.0 from November’s 73.7, the index actually sank to 65.1.
From the report:
The Conference Board Consumer Confidence Index®, which had declined slightly in November, posted another decrease in December. The Index now stands at 65.1 (1985=100), down from 71.5 in November. The Expectations Index declined sharply to 66.5 from 80.9. The Present Situation Index increased to 62.8 from 57.4 last month.
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Consumers’ assessment of current conditions improved in December. Those stating business conditions are “good” rose to 17.1 percent from 14.6 percent, while those stating business conditions are “bad” decreased to 27.3 percent from 31.2 percent. Consumers’ appraisal of the labor market was mixed. Those saying jobs are “plentiful” edged down to 10.3 percent from 11.0 percent, while those saying jobs are “hard to get” declined to 35.6 percent from 37.4 percent.
Consumers’ optimism about the short-term outlook plummeted in December. The percentage of consumers expecting business conditions to improve over the next six months declined to 17.6 percent from 21.3 percent, while those expecting business conditions to worsen increased to 21.5 percent from 15.8 percent.
On a more pleasant note, the Commerce Department’s Census Bureau reported that sales of new single-family houses in November were at a seasonally-adjusted annual rate (SAAR) of 377,000 – beating expectations of 375,000.
From the report:
Sales of new single-family houses in November 2012 were at a seasonally adjusted annual rate of 377,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.4 percent (±16.8%)* above the revised October rate of 361,000 and is 15.3 percent (±18.7%)* above the November 2011 estimate of 327,000.
The median sales price of new houses sold in November 2012 was $246,200; the average sales price was $299,700. The seasonally adjusted estimate of new houses for sale at the end of November was 149,000. This represents a supply of 4.7 months at the current sales rate.
More good news came from the Department of Labor with its weekly report on initial unemployment claims. Economists were expecting initial claims to increase to 365,000 from last week’s 361,000. Although the revised figure for the previous week was bumped up to 362,000 – the advance figure for initial claims made during the week ending December 22 fell to 350,000. A Surprisingly Positive Final 2012 Update on Jobless Claims
The major ETFs expected to respond to the Consumer Confidence Index, the Commerce Department’s report on New Home Sales for November and the weekly report on initial unemployment claims are:
iShares Dow Jones US Home Construction Index Fund (NYSEARCA:ITB) +0.15% Learn More About iShares ETFs
Consumer Discretionary Select Sector SPDR ETF (NYSEARCA:XLY) +0.13%
Consumer Staples Select Sector SPDR ETF (NYSEARCA:XLP) +0.17%
SPDR S&P Retail ETF (NYSEARCA:XRT) +0.18
Vanguard REIT ETF (NYSERACA:VNQ) +0.35%
Bottom line: Although initial unemployment claims declined and new home sales improved, the negative “gut feeling” report on consumer confidence was validated on Thursday, when Senator Harry Reid announced that the fiscal cliff would likely be unavoidable.