Consumer Confidence Crumbled With Lower Home Prices

According to the Conference Board Survey consumer confidence dropped 8.3% in November to a reading of 87.3, the seventh m/m decline of 2007 and the largest since September 2005. The decline was to the lowest level in two years. A much lesser drop to 91.4 had been generally expected by economists.

Plans to buy major appliances in the next six months improved slightly from a very depressed October level but the percentage intending to buy a home collapsed to just 2.5%, the least since 1994.

Just 2.0% of respondents planned to by a new automobile within the next six months, the least since 1974.

Home prices in San Diego California were extremely weak with a 9.6% y/y decline as were prices in Miami Florida which fell 10.0% y/y. In Las Vegas home prices fell 9.0% y/y and in Los Angeles prices fell 7.0%.

Chain store sales dipped 0.1% last week after posing a 0.8% rise during the prior week, according to the International Council of Shopping Centers (ICSC)-UBS.

Despite the weak performance during Thanksgiving week, sales for the month of November rose 0.4% from the October average which fell 0.8% from September.

During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.

The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

On average, retail gasoline prices last week held at the prior period's level of $3.10 per gallon, according to the US Department of Energy survey.

Divided by consumer prices other than energy, these gasoline prices are just below the high reached in 1981.

Yesterday, prices for spot WTI crude oil stood at $97.71 per barrel, down slightly from last week's average.

In perhaps a favorable sign for home heating bills this season, natural gas prices continued the move sideways at the high end of the recent $6.5 - $7.5 per mmbtu range (-0.3% y/y).

Gold prices continued to hover around the $800 per ounce level and the level surpassed the previous record price reached in early 1980.

Oil Shocks and Price Stability from the Federal Reserve Bank of St. Louis is available here.

There is not much to say about Germany’s flash HICP since the report provides no detail. But the headline says quite a lot this month. Inflation in Germany is steadily accelerating. In prior months core inflation had crept up above the 2% mark which is the ECB’s top allowed rate for all of inflation for the whole of the Euro area. At 3.3% Germany’s headline rate is way over the ECB’s top allotment and Germany has been a low inflation country. ECB members have been warning of inflation pressures for some time. Money and credit growth in the monetary union remain above their respective comfort marks. But the financial turbulence has not gone away. With this report the ECB is again on the hot seat.

The overall IFO business sentiment index rose to 104.2 in November from 103.9 in October. Current conditions improved to 110.4 from 109.6. But expectations slipped to 98.3 from 98.6. Even so the table below shows that the growth of the various indexes is slipping further. The Biz climate index, though higher on the month, is 2.5% lower year/year worse off than in October. The current conditions index has fallen more year/year as well. Business Expectations are off by 2%, their worst year/year drop so far.

The graph speaks to sectors. Retailing is weakening. Services are flattening. Manufacturing actually picked up in the month, but not by a lot.