Economy Watch: Homebuilders Confidence a Little Rattled

The National Association of Homebuilders reported that builder confidence in the market for newly built, single-family homes weakened a bit in May.

By Dees Stribling, Contributing Editor

The National Association of Homebuilders reported on Thursday that builder confidence in the market for newly built, single-family homes weakened a bit in May. The NAHB/Wells Fargo Housing Market Index fell one point to 45 from a downwardly revised April reading of 46.

The index’s components were mixed in May. The component gauging sales expectations in the next six months rose one point to strong 57, while the component measuring buyer traffic increased two points to a still-glum 33. The component gauging current sales conditions fell two points to 48, just barely gloomy. Any number over 50 indicates that more builders view conditions as good than poor.

“Builders are waiting for consumers to feel more secure about their financial situation,” NAHB chief economist David Crowe notes. “Once job growth becomes more consistent, consumers will return to the market in larger numbers and that will boost builder confidence.”

Inflation edges up in April

The Bureau of Labor Statistics reported on Thursday that the U.S. Consumer Price Index for All Urban Consumers increased 0.3 percent in April, the largest monthly increase since last June. Over the last 12 months, the all-items index increased 2 percent, precisely the target inflation of the Federal Reserve, and the largest annual increase since last July.

Inflationary pressure was broad-based for the month. The prices of gasoline, shelter and food all rose in April and contributed to the all items increase. The gasoline index rose 2.3 percent, leading to the first increase in overall energy prices since January, despite declines in the price of electricity and fuel oil. The food index rose 0.4 percent for the third month in a row, as the price of meat rose sharply.

Take food and energy out of the picture, and consumer prices were up 0.2 percent in April, with most of its major components posting increases, including shelter, medical care, airline fares, new vehicles, used cars and trucks, and recreation. Prices for apparel, household furnishings and operations, and personal care were all unchanged in April.

Unemployment claims drop sharply

In the week ending May 10, initial unemployment claims came in at an annualized 297,000, a decrease of 24,000 from the previous week, according to the U.S. Department of Labor on Thursday. This is the lowest level for initial claims since May 12, 2007, when they were 297,000. The four-week moving average was 323,250, a decrease of 2,000 from the previous week.

Wall Street dropped again on Thursday on reports of weak earnings, with the Dow Jones Industrial Average down 167.16 points, or 1.01 percent. The S&P 500 was off 0.94 percent and the Nasdaq declined 0.76 percent.

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