Tuesday 12 December 2017

US house prices up in May suggesting recovery in sector gaining traction

Leah Schnurr and Jason Lange

US single-family home prices rose for the fourth month in a row in May when adjusting for seasonal swings, suggesting the recovery in the housing market continued to gain traction.





Other data on Tuesday showed spending by American consumers fell in June for the first time in nearly a year when accounting for inflation, underscoring the recent loss of momentum in the broader economy.

The S&P/Case Shiller composite index of 20 metropolitan areas gained 0.9pc in May on a seasonally adjusted basis, topping economists' expectations for a 0.5pc gain.

On a non-seasonally adjusted basis, prices fared even better, jumping 2.2pc.

The rate of decline on a yearly basis moderated, with prices down 0.7pc compared to a 1.9pc drop in April.

The housing market, which collapsed during the 2007-2009 recession, has been a relative bright spot in the economy this year, although it remains hobbled by a glut of unsold homes.

"Real estate continues to show improvement off the bottom. That's one of the few encouraging signs we've seen," said Subodh Kumar, an investment strategist at Subodh Kumar & Associates in Toronto.

Groundbreaking on new U.S. homes, for example, rose in June to its fastest pace in over three years.

But since housing makes up a smaller share of the economy than before the recession, it can provide only a limited lift to the broader recovery.

The U.S. economy has looked much more wobbly of late, and if the recovery sputters further, housing also would suffer.

Consumer spending, which makes up about 70pc of U.S. economic activity, fell 0.1pc in June when adjusted for rising prices, the Commerce Department said in a separate report.

"Consumers are afraid," said Matthew Lifson, an analyst at Cambridge Mercantile Group in Princeton, New Jersey. "This data suggests that the U.S. economy is stagnant overall and it's just muddling."

Before making price adjustments, spending was flat. That was just below the median forecast in a Reuters poll of 0.1pc increase.

U.S. stocks opened slightly lower, while U.S. Treasury debt prices kept their earlier gains and the dollar held onto its earlier losses versus the euro.

Pressure is rising on policymakers at the U.S. Federal Reserve to do more to help the sputtering U.S. economy. The faltering recovery also weighs on President Barack Obama's hopes of re-election in November.

The Commerce Department had already reported that economic growth slowed over the entire second quarter as consumers spent at their slowest pace in a year. But Tuesday's data showed consumer spending lost momentum throughout the period when taking inflation into account.

U.S. household income rose in June by 0.5pc the most in three months - although consumers socked away part of the extra cash by saving more.

Analysts had expected a gain of 0.4pc. After tax income climbed 0.3pc in June when accounting for higher prices.

Reuters

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business