Confidence Slightly Below Estimates, Existing Home Sales Fall

- Consumer Confidence for April fell to 104.0 versus estimates of 105.0 and an upwardly revised 108.2 in March.

- Existing Home Sales for March fell to 6.12M versus estimates of 6.4M and 6.68M in February.

BOTTOM LINE: Consumer confidence in the US declined to the lowest level since April on rising gas prices and housing worries, Bloomberg reported. The Present Conditions component of the index fell to 131.3 versus 138.5 the prior month. The Expectations component fell to 85.8 from 87.9 the prior month. However, the percentage of people expecting more jobs over the next six months rose to 12.9% from 12.7% the prior month. As well, those planning to purchase an auto rose to 6.0% from 5.4% the prior month. The Fed’s Mishkin said recently that subprime spillovers “appear to have been minimal” and that “most borrowers are not likely to face a serious credit constraint.” As well, historically low unemployment and strong wage growth are helping sustain consumer sentiment and spending. Confidence in the Northeast Central region continues to depress the overall gauge. It fell another 10% to a very depressed 59.0 and is right at the major bear market lows seen in 2003. I continue to expect consumer confidence to head back to cycle highs later this year as gas prices fall, inflation decelerates, the job market remains healthy, housing sales stabilize at relatively high levels, interest rates remain low and stocks rise further.

Sales of previously owned homes in the US fell more than forecast in March, Bloomberg reported. Existing home sales had surged the prior month the most since December 2003. This month’s decline in sales was partly weather related. The supply of homes for sale at the current sales pace is now 7.3 months’ worth versus 6.8 months in February. The median price of an existing home remained steady, falling .4% to $217,000. Sales fell 10.9% in the Midwest, 9.1% in the West, 8.2% in the Northeast and 6.2% in the South. I expect existing home sales to bounce back next month, however construction will remain muted as homebuilders reduce inventory.