Economist's Commentary: June 24, 2008

Quick Take on the Economy: June 24, 2008

By Harika "Anna" Barlett, Senior Research Analyst, NAR Research

According to the Conference Board's measurement, the consumer confidence index declined in June to 50.4 (1985=100), a 7.7 percentage point drop from 58.1 in May. This is an all time low reading.
The Consumer Confidence Index measures consumers' attitudes and expectations in regard to economic conditions. This index consists of two parts, one about consumers' assessment of current conditions, which makes up 40 percent of the index, and the other about their future expectations, which accounts for the remaining 60 percent. The Present Situation Index decreased to 64.5 in June from 74.2, and the Expectations Index declined to 41.0 from 47.3 in May.
These results are consistent with very low level of economic growth, and may indicate a near bottom in consumer confidence.

The Richmond Fed survey indicates manufacturing activity further contracted in June. The seasonally adjusted manufacturing index decreased to -12 from -3 in May. The measures of shipments, new orders, backlogs, and employment have shown a decline, while raw material prices have increased and further price growth is expected.
The Richmond Fed Index tracks industrial performance and offers insights into the manufacturing industry in the Richmond Fed area, which covers the geographical area of Maryland, North Carolina, South Carolina, Virginia, West Virginia, and Washington, D.C., and a variety of prominent industries, including shipbuilding, textiles manufacturing, tobacco processing, and coal mining. Additionally, the Richmond Fed Manufacturing Survey asks industry executives about their price expectations and thus captures information on inflation expectations.
Manufacturers indicate that currently inventories expand at a slower pace compared to the previous month, which points to the continuing slow down. But, the survey results also show capital expenditures are expected to grow a bit more rapidly in upcoming months.
The data about labor market conditions suggest mixed conclusions -- while the employment index declines, the average workweek indicator improves.

Consumer pessimism continues and manufacturers in the Mid-Atlantic area are less optimistic than the previous month.
The past experience shows that what consumers express about their expectations may not always match their actions that follow. So, in the current situation, we will have to wait and see how falling consumer confidence impacts the economy.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

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