Consumer confidence drop weakens construction industry recovery

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Reed Construction Data chief economist Jim Haughey writes the decline in consumer confidence is largely due to rising inflation, especially energy, together with a small contribution from the Japanese tragedy. The Consumer Price Index has risen at almost a 6% annual pace in the last two months. Inflation is beginning to creep into non food and energy price with the core inflation rate, excluding food and energy doubling to a 2.5% annual pace in the last two months. Fear of future inflation sharply cut consumer expectations for real income and job availability six months ahead while consumer estimates of current economic conditions slipped only marginally.

Confidence is not likely to rise in April and is more likely to slip lower when the full impact of recent event in Japan and Libya will be incorporated in the monthly survey.

Housing has already taken a hit from falling confidence. All of the housing market reports for February were negative except for a slim gain in pending home sales. The negative spillover for nonresidential and heavy construction will come in the spring but will be less negative .This is because business confidence will suffer less than consumer confidence and the small impact on tax collection will be spread out over the next year. Read More.

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