“Crash, correction or chill” looks at economic and real estate trends that offer hints about how deep housing’s troubles may be.
Buzz: California consumers continue to be antsy at the start of the holiday gift-buying season with shopper optimism sinking for most of 2022.
Source: My trusty spreadsheet analyzed the Conference Board’s monthly polling of shoppers, which creates various consumer confidence indexes, including one for California.
California’s overall confidence index was 109.4 in November, down from a revised 109.8 a month earlier and down from 120.5 a year ago when the state economy was early its robust rebound from pandemic business limitations.
That’s a 0.4% one-month drop and a 9.2% dip over 12 months. California’s confidence averaged 119 in the two years before the pandemic and this measure of consumer psyche has fallen two months in a row and eight of the last 11.
Look, there’s plenty to worry late in 2022 such as high inflation, soaring interest rates and some high-profile layoffs in the technology industry. And politics – domestically and internationally – have, at best, lots of question marks.
Let’s ponder two confidence measures inside the statewide index.
The California consumer’s view of current conditions is mushy. This index was 139.8 for November — down from 144.4 a month earlier and below 154.7 a year earlier. This measure averaged 162 in pre-pandemic 2018-19.
But shoppers’ outlook turned upbeat. This forward-looking “expectations” index was at 89.2 for November — up from October’s 86.8 but down from 97.7 a year earlier. This measure averaged 91 in 2018-19.
The Conference Board tracks the nation and seven other states — Texas, New York, Florida, Illinois, Pennsylvania, Ohio, and Michigan. How did California compare?
Overall confidence: There were four increases among the seven states in November but no gains over the past year. Nationally, the U.S. index was down 2% for the month and 10% lower over 12 months.
Current conditions: Five increases in a month; three up over the year. Nationally, down 1% for November; 5% lower over 12 months.
Outlook: Two increases in a month; none up over the year. Nationally, down 3% for the month; 16% lower over 12 months.
Economic arch-rivals? Texas’ overall confidence rose 4% in November and decreased 7% in the year. Florida? 8% one-month gain, 5% 12-month dip.
What’s driving swings in optimism? Well, the Conference Board also asks consumers nationwide about the job market and plans to make major purchases in the next six months …
More jobs? 18.6% said “yes” in November — down from 19.5% a month earlier and down from 22.8% a year earlier. Employment growth was forecast 19% of the time in pre-pandemic 2018-19.
Buy a home? 6.4% said “yes” — down from 7.4% in October but up from 5.8% 12 months ago. In 2018-19, 6.1% were in a house-buying mood.
Buy a vehicle? 10% said “yes” — down from 12.9% a month earlier but up from 9% a year earlier. In 2018-19, 12.7% were in a car-buying mood.
Major appliance purchase? 45% said “yes” — down from 52% the previous month and down from 48% 12 months ago. In 2018-19, 51% planned for a new appliance.
Then there’s the big unnerving trend: inflation. Americans polled expect the cost of living to be 6.2% higher in a year, up from 6.1% a month earlier but down from 6.3% a year earlier. Inflation of 4.7% was foreseen, on average, in 2018-19.
And 40% see the stock market lower in 12 months, compared with 41% the previous month but up from 34% 12 months ago. Stock drops were predicted 27% of the time in 2018-19.
Crash, correction or chill?
Crash: The most worrisome number in the report is the growing pessimism about the U.S. jobs market. Layoff headlines are unnerving even if employment statistics still look promising. Will such worries muzzle gift-giving and the broad economy?
Correction: California isn’t alone with declining optimism. The national confidence index has had seven down months in 2022. Maybe we’ll see a holiday splurge before these bad vibes hits home.
Chill: It might be a good gift-giving year. California’s expectations index rose in November though it’s still off from a year ago and running below the 2015-19 average. Do consumers sense some optimism that numerous economic gurus are missing? Strong holiday sales might uncover such hidden strengths.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected]