Consumer Confidence Jumps, New Home Sales Rise, New Home Inventories Fall Most in Almost 50 Years

- Consumer Confidence for August rose to 56.9 versus estimates of 53.0 and a reading of 51.9 in July.

- New Home Sales for July rose to 515K versus estimates of 525K and a downwardly revised 503K in June.

- The 2Q House Price Index fell 1.4% versus estimates of a 1.5% decline and a 1.7% fall in 1Q.

BOTTOM LINE: Consumer confidence in August increased more than forecast in August as cheaper gasoline improved Americans’ moods, Bloomberg said. The Present Situation component fell to 63.2 from 65.8 in July. The Expectations component jumped to 52.8 from 42.7 in July. The percentage of Americans that said they expected fewer jobs six months from now fell to 30.6% versus 37.3% the prior month. The proportion of people expecting their incomes to rise over the next six months rose to 14.7% from 14.3% in July. Those Americans planning to purchase a home rose to 3.3%, which is back to the five-year average, from 2.8% in July. Those planning to purchase an automobile rose to 5.3% from 5.0% in July. The average cost of a gallon of regular gas peaked at $4.11 on July 16 versus $3.67/gallon yesterday. I expect confidence to continue to improve through year-end on an end to the election uncertainty, lower food/energy prices, a higher US dollar, rising stock prices, diminishing housing market fear, a modestly improving labor market, low interest rates and decelerating inflation.

New Home Sales in the US improved in July and a decline in home construction reduced the inventories of properties on the market by the most in almost 50 years, Bloomberg reported. The number of unsold homes on the market plunged 5.2%, the most since November 1963. Lower prices have made homes more affordable for Americans, stemming the slide in demand and making it more likely inventories will fall. The BankRate.com average fixed 30-year mortgage rate is currently 6.33%, down 18 basis points from 6.51% one month ago. I expect mortgage rates to decline meaningfully over the coming months as credit angst subsides. This should further boost affordability and help boost demand.