Consumer confidence surges in April

Consumer confidence surges in April
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: April 28 2009 14:38 | Last updated: April 28 2009 15:57
http://www.ft.com/cms/s/0/07b8662e-33ed-11de-9eea-00144feabdc0.html


US consumer confidence jumped the most more than three years in April, as the recent stock market rally dispelled gloom about the economy, but house prices in the largest US cities tumbled further in February.

However, for the first time in 16 months house prices’ rate of decline eased from the prior month offering a glimmer of hope that the stricken property market could be beginning to bottom out. The 18.6 per cent drop in house prices followed a 19 per cent year-on-year decline in January, a record, as prices fell steeply in a wide array of cities including Cleveland, Charlotte, New York and Washington, according to the closely watched Case-Shiller index, released on Tuesday.

Separately on Tuesday US consumer confidence jumped the most since 2005 this month, as the recent stock market rally lifted spirits. Combined the results add to the case that the US economy could be digging itself out of the worst recession since the Great Depression

The cities facing the sharpest February home price declines were Phoenix, San Francisco and Las Vegas.

February was the 30th consecutive month that the index, published by Standard and Poor’s, declined. However it was the first time since October 2007 that the index of the 20 biggest US cities did not report record annual price drops. Although prices in all the cities continued to fall, Dallas, Denver and Boston performed relatively well.

“While the declines in residential real estate continued into February, we witnessed some deceleration in the rate of decline in some of the markets,” said David M. Blitzer, chairman of Standard and Poor’s index committee. “We will certainly need a few more months of data before we can determine if home prices are finally turning around.”

Tuesday’s figures were slightly better than economists expected, but analysts warn that home prices in the US remain severely depressed.

According to Case-Shiller, prices in the 10 largest and 20 largest US cities have plunged by 31.6 per and 30.7 per cent, respectively, from their peak in 2006. Economists at High Frequency Economics note that housing wealth in February fell by $340bn, an annual decline of 18.4 per cent.

“If it is a green shoot, it is one growing out of the floor board of a home, where prices have collapsed by so much and at such pace, that prices surely could not keep up the sheer speed of descent,” said Alan Ruskin, strategist at RBS Greenwich Capital.

Consumer confidence, however, reversed its recent descent in April. The Conference Board said on Tuesday that consumers are starting to feel better about the economy, with its index exceeding the most optimistic predictions and rising to 39.2 from 26.9 the prior month. The rise was fuelled by a dramatically improved short-term outlook and less pessimism about unemployment.

“Confidence is presumably being supported by the recent 20 per cent rise in the stockmarket and signs that conditions have stabilised from the chaos of the end of last year,” said Paul Dales, US economist at Capital Economics.