Home Prices Probably Fell, Confidence Up: U.S. Economy Preview

December 25, 2011, 12:34 AM EST By Timothy R. Homan

Dec. 25 (Bloomberg) -- Home prices in 20 U.S. cities probably declined at a slower pace and consumer confidence improved, signs the economy gained strength heading into 2012, economists said before reports this week.

Property values dropped 3.2 percent in October from the same month in 2010, the smallest year-over-year decrease since January, according to the median forecast of 20 economists before a Dec. 27 report from S&P/Case-Shiller. Consumer confidence rose to a five-month high in December and more people signed contracts to buy previously owned homes than a month earlier, other data may show.

Rising builder confidence, fewer unsold new properties on the market and a pickup in construction point to improvement in the industry that triggered the last recession. Real estate is still facing another wave of foreclosures that may keep pressure on home prices, making for an uneven housing recovery.

“We’ll continue to see prices drop,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “The middle of 2012 is when we think prices will actually bottom.”

Economists surveyed projected the gauge of residential real-estate values declined 0.3 percent in October from the prior month, when it fell 0.6 percent. The index was down 31 percent in September from its July 2006 peak.

The year-over-year gauge provides a better indication of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.

Pending Home Sales

Figures on Dec. 29 may show pending sales of previously owned homes rose 1.5 percent in November after a 10 percent jump, economists said before a report from the National Association of Realtors.

Reports last week showed a pickup in demand for houses. Sales of previously owned homes, which make up about 94 percent of the market, rose 4 percent to a 4.42 million annual pace, the most since January, the National Association of Realtors said Dec. 21.

Purchases of new single-family properties advanced 1.6 percent to a 315,000 annual pace, a seven-month high, figures from the Commerce Department showed Dec. 23. The increase pushed the number of new homes on the market to a record low.

Those gains have buoyed builders’ stocks since the end of the third quarter. The Standard & Poor’s Supercomposite Homebuilding Index, which includes Toll Brothers Inc. and Lennar Corp., has climbed 32 percent, while the broader S&P 500 has gained 12 percent.

Consumer Confidence

As housing stabilizes and employment strengthens, consumers are becoming more optimistic. Confidence rose to 58.6 from 56 last month, according to the Bloomberg survey median before a Dec. 27 report from the New York-based Conference Board.

Other surveys reflect gains in optimism. The Bloomberg Consumer Comfort Index improved to minus 45 in the period ended Dec. 18 from a reading of minus 49.9 the prior week, marking the biggest seven-day gain since January. The Thomson Reuters/University of Michigan index of consumer sentiment rose to a six-month high in December.

Some homebuilders say an increase in sentiment is needed to help boost demand.

“We need a higher level of confidence to get back to the traditional move-upstream or first-time buyer out of the rental,” Jeffrey Mezger, chief executive officer of KB Home, said on a Dec. 21 conference call with analysts. “A lot of consumers are surprised, frankly, at how low home payments are compared to rent.”

Policy makers are promoting programs designed to reinvigorate the housing market. The Obama administration this month started a new version of the federal Home Affordable Refinance Program, or HARP, after the original plan helped less than a quarter of the people targeted to lock in lower mortgage rates.

Officials at the Federal Reserve this month reiterated that they will keep the benchmark interest rate near zero until at least mid-2013. The central bank in September decided to reinvest maturing housing debt into new mortgage-backed securities instead of Treasuries.

--With assistance from Chris Middleton in Washington. Editors: Vince Golle, Kevin Costelloe

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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Trade Gap Probably Widened in April: U.S. Economy Preview

June 05, 2011, 12:17 AM EDT By Alex Kowalski

June 5 (Bloomberg) -- The U.S. trade deficit probably widened in April to a 10-month high, reflecting higher crude oil costs that have since retreated, economists said before a report this week.

The gap expanded to $48.9 billion from the $48.2 billion shortfall in March, according to the median of 61 estimates in a Bloomberg News survey ahead of the Commerce Department’s June 9 report. Other figures may show prices of goods from abroad decreased in May by the most in almost a year, showing the surge in commodity costs is fading.

A drop in deliveries from Japan, where the earthquake and tsunami in March hampered shipments of auto parts and other components, may have prevented imports from climbing even more. While a weaker dollar has made American products more competitive for manufacturers like Dow Chemical Co., a cooling in the world economy may limit U.S. exports in coming months.

“We are seeing a slowdown in global growth that should mean a slowdown in export growth,” said Julia Coronado, chief economist for North America at BNP Paribas in New York. “At the same time, in the second quarter we have pretty significant supply-chain issues that are going to weigh very heavily on imports.”

The rise in oil prices through April has taken a toll on demand in the U.S., recent reports have shown. Manufacturing grew in May at the slowest pace in more than a year, according to Institute for Supply Management data last week.

Housing, Spending

Home prices in 20 U.S. cities dropped in March to the lowest level since 2003, figures from the S&P/Case-Shiller showed on May 31. Consumer spending grew less than forecast in April, according to a Commerce Department report.

Employers in May added the fewest number of workers in eight months and the jobless rate unexpectedly increased to 9.1 percent, the Labor Department said on June 3.

The recent spate of data has pushed stocks lower and Treasuries higher. Since the end of April, the Standard & Poor’s 500 Index has declined 4.7 percent. The yield on the benchmark 10-year note, which moves inversely to price, dropped to 2.99 percent as of June 3 compared with 3.29 percent on April 29.

The price of oil, which makes up about 15 percent of U.S. imports, peaked in April when it reached the highest level since August 2008.

Oil Costs

Energy prices have since declined, a reason Labor Department figures on June 10 may show import prices decreased 0.7 percent in May from a month earlier, according to the Bloomberg survey median. It would mark the first drop since June 2010, after a 2.2 percent gain in April.

Federal Reserve Bank of Cleveland President Sandra Pianalto said she anticipates the recovery will proceed and that the boost in prices caused by commodities will ease going forward.

“I expect the economy to continue on a gradual recovery pace over the next few years, with annual growth just above 3 percent a year,” Pianalto said at a June 1 speech in Columbus, Ohio. “Inflation will be temporarily elevated this year due to developments in oil and food prices, but I expect inflation to fall back below 2 percent in the next couple of years.”

The Fed releases its regional Beige Book economic survey on June 8, which is published two weeks before each Federal Open Market Committee meeting.

Weaker Dollar

American companies have benefited from a weaker dollar, which has dropped about 10 percent in the 12 months through May against a weighted basket of currencies from the country’s biggest trading partners.

“The low dollar means we can export, so we are actually fundamentally growing globally from the U.S.,” Andrew Liveris, president and chief executive officer at Dow Chemical, said during a June 2 conference call. “We see strong growth drivers in emerging regions. China is the locus of growth.”

Dow, based in Midland, Michigan, also expects “a short- term boost in Japan as that country rebuilds from its recent tragic natural disaster,” Liveris said, referring to the Asian nation’s March earthquake and tsunami.

--With assistance from Chris Middleton in Washington. Editors: Vince Golle, Carlos Torres

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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Consumer Spending Probably Eased in April: U.S. Economy Preview

May 22, 2011, 12:22 AM EDT By Timothy R. Homan

May 22 (Bloomberg) -- Consumer spending probably cooled in April as higher food and fuel prices forced Americans to cut back on other items, economists said a government report this week will show.

Purchases increased 0.5 percent, the smallest gain in three months, after climbing 0.6 percent in March, according to the median estimate of 66 economists surveyed by Bloomberg News before a May 27 Commerce Department report. Other data may show business investment, the stalwart of the recovery, kept growing.

Manufacturers like Deere & Co. are benefiting from gains in spending on equipment and software, while retailers like Wal- Mart Stores Inc. are reporting slower U.S. sales as households feel the pinch of grocery and energy bills. Chairman Ben S. Bernanke is among Federal Reserve officials who predict the acceleration in commodity prices will be temporary.

“Consumers are allocating more of their dollars toward fuel,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “Manufacturing has been holding up pretty well considering the rise in gasoline prices” and the supply-chain disruptions in Japan, he said.

The Commerce Department report will also show incomes rose 0.4 percent, the seventh straight monthly gain, after a 0.5 percent increase in March, according to the survey median.

Higher prices for necessities like food and energy are weighing on purchases of less essential items. The average cost of a gallon of regular gasoline averaged $3.81 in April after $3.54 the prior month, according to AAA, the nation’s biggest motoring organization.

Less Pressure

Cost pressures have started to wane this month. Prices at the pump peaked at $3.99 on May 4, the highest since July 2008, and declined to $3.89 on May 19.

Sales at U.S. Wal-Mart stores open at least a year dropped 1.1 percent in the first quarter, the eighth decline in a row, the world’s largest retailer said last week. Customers are still struggling with economic uncertainty, buying more generic items rather than their more costly name-brand counterparts, executives said in a May 17 pre-recorded call.

American manufacturers are faring better than consumers as increasing demand from emerging economies like China supplements gains in business spending.

Deere, the world’s largest farm-equipment maker, last week raised its fiscal 2011 earnings forecast and posted second- quarter profit that beat analysts’ estimates amid increasing demand for agriculture and construction equipment.

Equipment Orders

A May 25 Commerce Department report will show that orders for durable goods, excluding volatile transportation bookings, increased 0.5 percent in April after a 2.3 percent jump the prior month. Overall demand fell 2.5 percent, economists said, because of a drop in airplane orders at Boeing Co.

One part of the world’s largest economy that continues to struggle is the housing market, particularly as foreclosures mount. Pending home sales, or contract signings for existing homes, fell 1 percent in April after a 5.1 percent increase the prior month, economists forecast the National Association of Realtors will report on May 27.

Sales of new homes, which account for about 5 percent of the market, were little changed at a 300,000 annual pace in April, according to economists surveyed by Bloomberg ahead of a May 24 report from the Commerce Department. New houses have sold at an average 294,000 rate in the first three months of the year, compared with a record-low 323,000 for all of 2010.

Shares of machinery makers have outpaced homebuilders since the beginning of the year. The Standard & Poor’s Supercomposite Machinery Index has climbed 5.1 percent compared with little change for the S&P Supercomposite Homebuilder Index.

Jobs, Sentiment

Gains in employment and higher stock values are outweighing gas prices when it comes to confidence among Americans, according to data from Thomson Reuters/University of Michigan.

The group’s final sentiment index for May is projected to climb to 72.4, the highest in three months, from 69.8 at the end of April, according to economists surveyed ahead of the May 27 report.

The pace of growth during the first quarter was stronger than previously estimated, economists said figures from the Commerce Department on May 26 will show. The economy expanded at a 2.2 percent rate, up from the 1.8 percent initially estimated, according to the survey median.

The GDP estimate is the second of three for the quarter, with the final release scheduled for June, when more information becomes available.

--With assistance from Chris Middleton in Washington. Editors: Carlos Torres, James Tyson

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz in Washington at cwellisz@bloomberg.net

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