WASHINGTON -- The housing market continued to hold its ground in September, while consumer confidence deteriorated slightly for the fourth straight month in October, according to two separate reports yesterday.
"There was nothing earthshaking in these reports," said Daryl Delano, a senior economist with Cahners Economics Inc. in Newton, Mass. "They provide mixed signals about the direction of the economy."
Sales of existing homes grew 1% in September to a seasonally adjusted annual rate of 3.97 million units, erasing a revised 1% decline in August. the National Association of Realtors reported.
The housing market continues to surprise on the upside, analysts said. "It's not a blockbuster report, but it shows the housing market is still doing okay," said Josh Feinman, global markets economist at Bankers Trust Co.
Most of the sales strength came in the Midwest, where sales surged 7.9% to an annual rate of 1.09 million. Elsewhere, the South gained 0.7% to 1.46 million, the West was un.changed at 870,000, and the Northeast dropped 6.7% to 560,000.
Meanwhile, the Conference Board said its consumer confidence index edged down 1.9 points to 87.6 in October, following smaller declines in the three previous months.
The index remains relatively strong but off its recent peak of 92.5 set in June, economists said.
The research group's 5,000-household survey showed that consumer sentiment about current conditions improved marginally in October, but not enough to fully offset declining optimism about the future.
"Buying plans are down rather substantially in October," the New York-based group said in its report. "Auto-buying plans have been declining since July; intentions to purchase a home are off for the second consecutive month;land] plans to purchase a major appliance are also well below a month ago."
The report should be viewed as good news by the Federal Reserve, which is widely expected to raise short-term interest rates for a sixth time in mid-November to slow growth to what is viewed as more sustainable levels, noted Delano.
"This is real evidence of a possible slowdown in growth in the coming months," he said.
Nonetheless, the bottom is not dropping out of consumer confidence, according to Fabian Linden, executive director of the group's research center. "The message from the nation's consumers suggests continued economic growth in the months ahead," he said.
Also yesterday, the Labor Department reported that worker compensation in the United States grew 0.7% in the third quarter and was up 3.2% compared with a year earlier. The year-over-year gain has been unchanged for the past three quarters and is at the lowest level since the indicator began in 1981, according to yesterday's report.
"It was an excellent report," Feinman said. "This is the broadest and most comprehensive measure of labor costs."
Inflation has remained subdued in the face of robust growth primarily because labor costs have not surged, but the Fed can't afford to wait until growth of labor costs starts to accelerate, analysts said. "The problem is you don't know whether the wage situation is going to stay this good," Feinman said.
Wages and salaries grew 0.7% in the third quarter, while benefit costs advanced 1%, according to the report. Year-over-year, wages and salaries were up 2.9% and benefits were up 3.8%.