Heading into the Holidays, Consumer Sentiment Falls Further Than Expected

​November’s final Consumer Sentiment reading fell more than expected to 97.5 points, continuing a slide off of March’s fourteen-year-high reading of 101.4. New housing starts grew last month amid rising tariff-related costs for builders, driven by new construction of multi-family housing units. Lastly, initial unemployment claims rose suddenly to a four-month high of 224,000, despite continuing claims falling to 1.67 million, a level not seen since the early 1970s.

• Heading into Black Friday and the peak weekend of the holiday shopping season, The University of Michigan announced that consumer sentiment fell more than expected in November. Economists anticipated a slight 0.3-point drop from October’s 98.6 reading. However, the final reading showed a 1.1-point drop to 97.5 for this month. A slumping stock market and rising interest rates are the driving forces in this month’s decline in sentiment.

• The U.S. housing market expanded along new housing starts last month, despite increased costs of building for contractors. In October, housing starts increased by 1.5% from one month prior to 1.228 million, with much of the growth coming from a bounce back in multifamily units. Housing starts fell for single-family units. However, consumer optimism towards building new homes seems to be waning, input costs continue to rise, and the Fed is planning to gradually raise rates, placing pressure on housing demand.
  

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• Initial claims for unemployment benefits rose suddenly in the week ended November 17 to a four-month high. New claims rose to 224,000, a 1.4% hike from the 221,000 claims the week before. While the weekly claims figure can be written off for being volatile, the steadier four-week moving average of claims rose by 2,000 to 218,500. However, these figures should be taken with a grain of salt, as the number of individuals already collecting unemployment benefits fell 2,000 to 1.67 million, the lowest level since the early 1970s.