U.S consumer confidence fell in September and home sales dropped to an eight-month low in August due to the impact of Hurricanes Harvey and Irma, supporting the view that the storms would hurt economic growth in the third quarter.
The economy, however, remains on solid ground as other data on Tuesday showed a strong increase in house prices in July.
The Conference Board said its consumer confidence index declined to a reading of 119.8 this month from 120.4 in August, which was the highest reading in five months. It said confidence in Texas and Florida “decreased considerably.”
The survey showed consumers’ views of the labor market were less upbeat. The share of consumers saying jobs are “plentiful” fell to 32.6 percent from 34.4 percent in August.
However, the proportion of those stating jobs are “hard to get” slipped to 18.1 percent from 18.4 percent. The number of consumers expecting an improvement in their incomes rose marginally to 20.5 percent this month from 19.9 percent in August. The share expecting a drop in income was unchanged at 8.3 percent.
Despite being near full employment, the labor market has struggled to generate strong wage growth, frustrating both consumers and policymakers. But rising home prices should continue to underpin consumer spending, even though the housing market is slowing.
A second report on Tuesday showed the S&P CoreLogic Case-Shiller composite index of house prices in 20 metropolitan areas rose 5.8 percent in July on a year-over-year basis after increasing 5.6 percent in June.
An acute shortage of homes on the market and strong demand are pushing up house prices. While rising house prices are boosting equity for homeowners, tight inventories are hurting home sales.
The U.S. dollar .DXY rose to its highest level since Aug. 31 against a basket of currencies after the data. U.S. stocks were trading higher while prices of U.S. Treasuries fell.
HOUSING SLOWING In a third report, the Commerce Department said new home sales decreased 3.4 percent to a seasonally adjusted annual rate of 560,000 units last month, which was the lowest level since December 2016.
Economists polled by Reuters had forecast new home sales, which account for 9.5 percent of overall home sales, rising 3.3 percent to a pace of 588,000 units last month.
New home sales, which are drawn from permits, are volatile on a month-to-month basis. Sales were down 1.2 percent on a year-on-year basis in August. The Commerce Department suggested Harvey and Irma likely impacted new home sales data last month.
It said “information on the sales status at the end of August was collected for only 65 percent of cases in Texas and Florida counties” affected by the hurricanes. That compared to a normal response rate of 95 percent.
Harvey hurt sales of previously owned homes in August and held back the completion of houses under construction. With Irma slamming Florida in September, housing market activity could remain weak. The areas in Texas and Florida affected by the storms accounted for 14 percent of single-family home permits in 2016.
Even before the hurricanes struck, the housing market was softening. Housing is being buffeted by headwinds, including shortages of homes available for sale, skilled labor and suitable land for building. Rising prices for building materials are also undercutting housing.
Housing weighed on the economy in the second quarter and economists expect the sector to be a drag on gross domestic product in the July-September period.
In August, new single-family homes sales fell in the Northeast, South and West. They were unchanged in the Midwest.
The inventory of new homes on the market rose 3.6 percent to 284,000 units, the highest level since May 2009. Still, new housing stock is less than half of what it was at its zenith during the housing bubble.
At August’s sales pace it would take 6.1 months to clear the supply of houses on the market, up from 5.7 months in July. A six-month supply is viewed as a healthy balance between supply and demand.