U.S. consumers viewed the economy with increased optimism in
August, hinting at a strong jobs report for the month.
The Conference Board, a private research group, said its index
of consumer confidence rose to 92.4 in August from a revised 90.3
in July (first reported as 90.9). The August index is the highest
since October 2007, before the recession started. Economists
surveyed by The Wall Street Journal had forecast the index would
fall to 88.5.
The present situation index, gauging consumers' assessment of
current economic conditions, jumped to 94.6 from a revised 87.9 in
July (originally 88.3).
Consumers who own homes got more goods news: The S&P
Case-Shiller report said home prices nationwide increased 6.2% in
the year through June.
The Conference Board survey also showed consumers more upbeat
about the labor markets. Some 18.2% of consumers say they think
jobs are "plentiful," up from 15.6% in July and the highest reading
since early 2008. Another 30.6% think jobs are "hard to get," down
from 30.9% saying that last month.
The difference between the two readings narrowed again in
August, suggesting further improvement in the employment report to
be released Sept. 5.
Getty Images Consumers are becoming notably more optimistic
about current labor market progress, consistent with the decline in
the unemployment rate," said Gennadiy Goldberg, U.S. strategist at
TD Securities.However, the share of respondents anticipating more
jobs in the future fell to 17.0% in August from 18.7% a month ago,
while the share anticipating fewer jobs also declined, to 15.8%
from 16.6%.
But rising confidence hasn't produced stronger spending. Even
for people with jobs, pay raises remain minimal and barely pacing
inflation. Small wage gains have held back spending.
Worse still, the board survey shows households don't expect much
change in the situation. In August, 15.5% of households expected
their earnings would rise in the next six months, down from 17.7%
saying that in July and the lowest reading since March.
Consumer expectations for economic activity over the next six
months fell to 90.9 after that index jumped to a revised 91.9 in
July from 86.4 in June. The July expectations index was first
reported as 92.7.
Consumer spending is vital to the U.S. economy, accounting for
about two-thirds of economic activity.
Kathleen Madigan WSJ.com The Recovery Accelerates
The U.S. economy's second-quarter rebound was more robust than
previously estimated and corporate profits surged, putting the
recovery back on track as it ended its fifth year.
Gross domestic product, the broadest measure of goods and
services produced across the economy, grew at a seasonally adjusted
annual rate of 4.2% in the second quarter when adjusted for
inflation, the Commerce Department said Thursday.
The agency had previously estimated the second quarter's growth
at 4%, relying on incomplete data for international trade,
inventories and other sectors. Economists surveyed by The Wall
Street Journal had expected growth for the second quarter to be
marked down to a 3.8% pace.
"On balance, today's revisions, though small, should be seen as
positive news for the growth outlook and make us more confident in
our projection of continued solid growth" in the second half of
2014, BNP Paribas economist Laura Rosner said in a note to
clients.
Ben Leubsdorf The Wall Street Journal Demand for Homes Grows
The number of contracts signed to buy previously owned homes
rose in July, a sign that steady job growth is supporting a rebound
in housing demand.
An index of pending home sales, reflecting purchases under
contract but not yet closed, rose 3.3% to 105.9 in July from June,
the National Association of Realtors said Thursday. That was a
bigger gain than the 0.6% rise forecast by economists and placed
the index comfortably over the 100 level that the trade group says
indicates "normal" sales activity.
Pending home sales have now risen four of the past five months,
though the index remains 2.1% below its level from a year ago. A
regional breakdown of the July data showed sales rising in the
Northeast, South and West, though they fell in the Midwest.
"While housing-market data has remained somewhat choppy, the
housing sector recovery continues to chug along" at a reasonable
rate, says TD Securities strategist Gennadiy Goldberg.
The latest report showed sales of existing homes, which account
for around 90% of the market, continuing to gain steam after
softening in late 2013 and early 2014. A rise in mortgage rates and
then unusually harsh winter weather had helped to derail a
housing-sector recovery that began in 2011.
Jonathan House WSJ.com Bank Lending Expands
U.S. banks increased their loan balances in the second quarter
of 2014 by levels not seen since before the financial crisis,
offering evidence of a pickup in lending as the economy slowly
recovers.
The Federal Deposit Insurance Corp. said banks' loan and lease
balances grew by $178.5 billion to $8.11 trillion, a 2.3% increase
over the previous quarter and the largest quarterly jump since the
last quarter of 2007. Commercial and industrial loans, residential
mortgages, credit-card balances, and auto loans contributed to the
growth, the agency said in its quarterly report of banks'
health.
The FDIC also said the banking industry continued to recover
from the financial crisis, though banks are still having trouble
boosting revenues in a low-interest-rate environment. Banks as a
whole recorded second-quarter net income of $40.2 billion, the FDIC
said, a 5.3% increase from a year earlier. The FDIC said that of
the 6,656 U.S. financial institutions, the number on its "problem"
list dropped to 354, the smallest count in five years.
Ryan Tracy The Wall Street Journal Nonbank Mortgages Surge
Nonbank lenders made almost a quarter of all mortgage loans in
the first half of the year, the highest level since at least the
financial crisis, according to data on the top-30 mortgage
originators from industry newsletter Inside Mortgage Finance.
Mortgage lending at big banks such as Wells Fargo & Co. and
J.P. Morgan Chase has dropped more quickly than the rest of the
industry in the wake of large mortgage-related legal settlements,
new banking standards that require lenders to carry more capital,
and increased scrutiny from regulators.
Quicken Loans, the largest mortgage lender outside traditional
banks, made $24.3 billion of loans in the first half, putting it on
a par with Bank of America and ahead of Citigroup, according to
Inside Mortgage Finance.
The rise of nonbank lenders is good news for consumers who
otherwise might not be able to get a bank loan in the current
environment. For banks, this marks a retreat from a business that
used to be very profitable but has turned into a legal and
financial headache since the crisis.
Joe Light The Wall Street Journal Orders for Durables Jump
Orders for big-ticket manufactured goods jumped to a record in
July thanks to a surge in aircraft purchases, while underlying
gauges of demand indicated strong momentum in broad business
spending.
Purchases of durable goods--products like airplanes, cars and
heavy machinery that are designed to last at least three
years--rose a seasonally adjusted 22.6% to $300.1 billion in July
from the prior month, the Commerce Department said Tuesday. That
was the sharpest increase and highest level in a data series dating
back to 1992. Economists surveyed by The Wall Street Journal had
forecast a 7.5% increase over June.
J.H. The Wall Street Journal Farm Incomes Set to Fall
U.S. farm incomes are expected to fall 13.8% this year to the
lowest level in four years as record harvests push down prices for
key crops, the U.S. Department of Agriculture said.
Federal forecasters projected net farm income would slide to
$113.2 billion from an estimated $131.3 billion in 2013, which was
the highest since 1973 on an inflation-adjusted basis.
The projected decline is narrower than the 27% drop the USDA
forecast in February. The change is due largely to an improved
outlook for livestock farmers, who are benefiting from record
prices for beef and pork as well as low prices for corn and other
grains used in animal feed. The USDA said on Tuesday that it
expects livestock farmers' receipts to rise 15% this year, compared
with a February projection of a 0.7% rise.
Jesse Newman The Wall Street Journal Fewer Accept Pay Cuts
More Americans are bouncing back after losing their jobs, and
fewer are accepting a pay cut as the price of returning to work.
Some 9.5 million people lost their jobs between January 2011 and
December 2013, including 4.3 million who lost jobs they had held
for at least three years, the Labor Department said Tuesday in its
biennial survey of displaced workers. As of January 2014, 61% were
back at work.
By comparison, less than half of the 15.4 million workers who
lost their jobs from 2007 through 2009, during the recession years,
were re-employed at the beginning of 2010.
B.L. Real Time Economics Blog WSJ.com Like Old Times
Former Federal Reserve Chairman Ben Bernanke, a prominent
student of the Great Depression, says the 2008 financial crisis was
actually worse than its 1930s counterpart.
Mr. Bernanke is quoted making the statement in a document filed
on Aug. 22 with the U.S. Court of Federal Claims as part of a
lawsuit linked to the 2008 government bailout of insurance giant
American International Group.
"September and October of 2008 was the worst financial crisis in
global history, including the Great Depression," Mr. Bernanke is
quoted as saying in the document. Of the 13 "most important
financial institutions in the United States, 12 were at risk of
failure within a period of a week or two."
Former Treasury Secretary Timothy Geithner is quoted in the
document offering a similarly apocalyptic assessment. From Sept. 6
through Sept. 22, the economy was essentially "in free fall," he
said.
Pedro Nicolaci da Costa Real Time Economics Blog WSJ.com