Cooling Consumer Sentiment and Weak Builder Confidence Signal a Challenging Road Ahead for the US Housing Market Consumer sentiment in the US dimmed further in November, reflecting the strain of elevated borrowing costs and a cooling, though not collapsing, labour market. According to the University of Michiganʼs Consumer Sentiment Survey, released last Friday, November 21, households reported a sharp pullback in their current financial conditions, with assessments of personal finances and durable-goods buying conditions both dropping more than 10 percent. While expectations for the year ahead showed a modest improvement, the overall mood suggests consumers are feeling the weight of tighter credit conditions and diminished purchasing power. In a speech last Friday, New York Federal Reserve President John Williams said that expectations are still “very well anchoredˮ, giving the central bank some flexibility to move policy closer to neutral. His comments signalled openness to a possible fourth-quarter-point rate cut this year, prompting traders to lift the odds of a December easing from 44.4 percent to 71 percent, according to the CME FedWatch Tool See Figure below). Still, Fed policymakers remain divided, some arguing for more support as the labour market cools, while others warn that easing too quickly could reignite inflation.
Figure 5. CME FedWatch Tool - Target Rate Probabilities