The market sell-off hurt, but how much?
How much did the recent stock sell-off dent consumer confidence? This week’s economic data should provide a good reading, as well as a trove of data on housing, business investment, consumer spending and a revised estimate of fourth-quarter economic growth.
The Conference Board’s release on Tuesday of its closely watched index of consumer confidence in February will likely be scrutinized more than usual. The measure remained high in January, but that survey was conducted before the plunge in markets. Job growth also slowed in January, but gasoline prices continued to tumble, perking up motorists. All told, economists expect the Conference Board to report a modest dip in Americans’ outlook.
Solid consumer confidence has helped lift the housing market the past year. In December, existing-home sales rebounded strongly after new mortgage-disclosure rules curtailed deals in November. In January, sales likely backed off that artificially inflated pace, says Stuart Hoffman, chief economist of PNC Financial Services Group. Economists expect the National Association of Realtors to report that existing home sales fell 1.1% last month to a seasonally adjusted annual rate of 5.4 million.
New-home sales also surged in December, though that was largely because of unseasonably high temperatures. Economist Lewis Alexander of Nomura expects some payback in January, as well as a hit to sales from harsh weather. Economists estimate the Commerce Department will report Wednesday that new-home sales fell 4.4% last month to a seasonally adjusted annual rate of 520,000.
Business investment, meanwhile, has been firmly entrenched on the negative side of the economy’s ledger. China’s slowdown and general weakness abroad, along with a strong dollar, have hindered manufacturers’ exports. And plunging oil prices have clobbered drilling and investment by oil producers. A jump in industrial production last month suggests the pain may have eased somewhat. Economists expect Commerce to announce Thursday that orders of durable goods such as cars and appliances rose 2.5% in January as a result of a surge in volatile demand for aircraft. But Hoffman figures orders for capital goods excluding aircraft and defense — a proxy for capital spending — were flat.
Consumer spending has more than offset the economic distress overseas. In January, a core measure of retail sales rose sharply, and Hoffman reckons demand for utilities spiked on colder weather. Economists expect Commerce to record a 0.3% rise in consumption on Friday.
The broader economy was weak in the fourth quarter, rising just 0.7% at an annual rate, according to Commerce’s initial estimate. Alexander says business stockpiling and government and business spending were likely even more sluggish than initially believed. And so Commerce is expected to revise down its estimate of fourth-quarter growth to 0.5%.