The economy may be showing signs of a turn upward. First, the Conference Board Consumer Confidence Index grew again, to 54.9 in May (from 40.8 in April). Additionally, solid efforts in single new home starts in Southern California (April) and home sales rising 2.9 percent in April (according to the National Association of Realtors), show the economy may be finally turning around.
Let’s take a look at the indicators. The Consumer Confidence Index is now at its highest level in eight months (61.4 in Sept. 2008), according to Lynn Franco, the Conference Board Consumer Research director.
“Continued gains in the Present Situation Index indicate that current conditions have moderately improved, and growth in the second quarter is likely to be less negative than in the first,” Franco said. “Looking ahead, consumers are considerably less pessimistic than they were earlier this year, and expectations are that business conditions, the labor market and incomes will improve in the coming months. While confidence is still weak by historical standards, as far as consumers are concerned, the worst is now behind us.”
Additional results of the study (5,000 U.S. households) with a May 19 cutoff date show consumers’ short-term outlook improved significantly in May. Those expecting business conditions will improve over the next six months increased to 23.1 percent from 15.7 percent, while those anticipating conditions will worsen declined to 17.8 percent from 24.4 percent in April.
The employment outlook was also less pessimistic. Consumers are expecting more jobs in the months ahead with an increase to 20 percent from 14.2 percent, while those anticipating fewer jobs decreased to 25.2 percent from 32.5 percent. Consumers are also anticipating an increase in their incomes: up to 10.2 percent from 8.3 percent.
Consumer confidence and security about their jobs along with feelings of improved business conditions will lead to more spending on luxury products for the home, compared to spending only for staple (necessity) products.
This confidence is also appearing in the housing market with the growth of sales to an annual rate of 4.68 million in April, according to the National Association of Realtors. The rate is up slightly from a revised pace of 4.55 million in March.
In recession-decimated Southern California, single-family home construction showed a significant increase in April when compared to March. According to the Building Industry Association of Southern California (BIASC), California’s $10,000 new homebuyer tax credit is helping to clear out inventory and generate new-home construction.
According to Construction Industry Research Board data, 819 single-family permits were pulled in Los Angeles, Orange, Riverside, San Bernardino, Ventura and Imperial counties during the month of April, down 36 percent when compared to the same month a year ago, but up 29 percent from March.
BIASC ceo Richard Lambros said while overall production is still down when compared to 2008, increases in several key areas are encouraging and could be another indicator that the market is flattening out.
“We are particularly encouraged by increases in single-family production in the Inland Empire,” Lambros said. “This was one of the first areas to slow, so to see builders re-engaging in this market is a positive sign.”
Multifamily permits totaled 198 for the six-county region, down 82 percent compared to April 2008 and down 65 percent from March. Orange, Ventura and Riverside counties showed increases in the number of multifamily permits pulled, however San Bernardino and Los Angeles counties showed significant drops.
These improving signs point to an even more positive trend: Months and months of pent up purchasing demand is about to return to the floor covering industry. Make sure you are ready with new products, displays and training to serve your customers.
Indicators Are Pointing Up to an Improving Economy
June 17, 2009