Economic Takeaways of U.S. Consumer Confidence, Advanced Trade

  • Sentiment unexpectedly rose to second-highest level since 2007
  • Goods trade deficit widens as global slowdown takes hold

What you need to know about Tuesday’s economic data:

CONSUMER CONFIDENCE (SEPTEMBER)

  • Conference Board’s gauge rose to 103, exceeding median forecast of 96.8, from August 101.3
  • Gain fueled by pickup in present conditions index, which was strongest since September 2007, while expectations measure eased
  • Jobs plentiful share increased to 25.1 percent, also an eight-year high
  • Buying plans climbed for homes and new cars, with the latter jumping to the highest level since February of last year

The Takeaway: The U.S. jobs machine has been humming and the gain in September confidence signaled it’s not skipping a beat even as the global economy shows further signs of malaise and Americans’ stock portfolios suffer. While the data showed more consumers than at any time since December 2012 expect equities to fall in the next year, resilient labor conditions are leading to more upbeat prospects for business and incomes. Adding to evidence of a percolating job market was a pickup in optimism among 35 to 54 year olds, who make up the lion’s share of the prime working-age population, was the highest since July 2001.

ADVANCED GOODS TRADE BALANCE (AUGUST)

  • Shortfall in goods widened 13.4 percent to $67.2 billion, the largest gap since March
  • Exports fell 3.5 percent, the most since January, while imports rose 1.8 percent
  • Drop in shipments overseas led by slumping sales of industrial supplies, including petroleum products

The Takeaway: The jump in the deficit in goods-only trade highlights how deteriorating global economies and the stronger dollar are spreading to U.S. shores. Economists at Morgan Stanley, who had been expecting trade to have little effect on third-quarter U.S. growth, now see net exports subtracting a full percentage point. Macroeconomic Advisers economists project third-quarter growth of 1.8 percent, down 0.6 percentage point from their previous tracking estimate. Neil Dutta at Renaissance Macro Research estimates a whopping 1.5 percentage point drag. Ouch.

S&P CASE-SHILLER HOME PRICES (JULY)

  • Home values in 20 U.S. cities rose 5 percent from a year earlier, consistent with gains throughout most of 2015
  • Prices fell 0.2 percent from June, the third straight decline
  • San Francisco led all cities with a 10.4 percent year-over-year advance, followed by Denver at 10.3 percent

The Takeaway: Scant inventory of available properties on the market is underpinning home values, while historically low mortgage rates are helping keep real estate within reach. Steady job gains, rental inflation and an easing of still-tight credit standards also should help prospective buyers find the wherewithal to make a purchase.

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