Michigan Sentiment Figures Rise Again
The key US sentiment measure, the Reuters/Michigan Consumer Sentiment Index has just been released for the month of April. The current reading is 84.1, this is once again higher beating the previous month’s figure of 80 and also topping the consensus estimate for a reading of 83.
Despite the natural optimism in built in the American psyche the elevated consumer confidence indicators do reflect a genuine uptick in US economic conditions. As evidenced in the Retail Sales numbers and the Durable Goods figures, consumer activity in the US economy remains high.
There are however two key weak spots in this recovery, the first is the neglect of public investment particularly in infrastructural opportunities, this however does not have an immediate impact over consumer confidence numbers. The second problem more directly affects the conditions experienced by individuals, this is the cooling of the housing market, normally this is a good situation for consumers as it makes living more affordable but this current cooling is very much demand driven.
The gradual tightening up of monetary conditions by the Fed as it slowly unwinds it’s bond buying program is causing the US Dollar yield curve gradually but persistently move higher, this is particularly in evidence at the medium to long end from where mortgage rates are derived.
The would be US home owner is not only facing higher mortgage rates but is also missing the variety of spurious mortgage products that fuelled the housing boom which contributed to the initial crises.
On the plus side for the US consumer is that the rising rate environment is causing investors to retreat from the residential property market in response to higher leverage costs and therefore falling yields. This should lead to a correction in house prices that will go some way to offsetting rising mortgage costs for US consumers.
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