The turn in home prices, although modest at the start, will help to boost consumer confidence. Simply believing that prices have stopped falling should provide a sense of relief to households. It will also allow households to have greater mobility, generating a more efficient labor market and greater churn in the housing stock.I made a similar argument a few weeks ago: The economic impact of a slight increase in house prices.
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While the housing market is far from normal, the bottoming in home prices marks an important shift for the economy. Home-price appreciation will slowly start to support household balance sheets and improve confidence, creating a positive feedback loop with the credit market and broader economy. It is gradual and fragile, but we believe it has finally begun.
On Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 370 thousand from 372 thousand.
• Also at 8:30 AM, the BEA will release the Personal Income and Outlays report for July. The consensus is for a 0.3% increase in personal income in July, and for 0.4% increase in personal spending. And for the Core PCE price index to increase 0.1%.
• At 11:00 AM, the Kansas City Fed regional Manufacturing Survey for August will be released. The consensus is for an a reading of 5, unchanged from 5 in July (above zero is expansion). This is the last of the regional surveys for August, and all of them have been weak.
A question for the August economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).
