WASHINGTON — A hazy picture of the U.S. economy has emerged from the most recent snapshots of retail sales, housing, manufacturing, the job market and the confidence of consumers.
The figures reflect higher borrowing costs, slower hiring and rising uncertainty just before much of the government shut down Oct. 1 – all trends that the Federal Reserve is trying to assess at a policy meeting this week.
Taken together, they portray an economy that was stumbling even before the shutdown, which further slowed growth.
Still, many Americans have managed to keep up their purchases in recent weeks. Their spending has raised hopes that if Congress can reach a long-term budget agreement in coming months, economic growth will pick up.
“One of the things that’s really holding back the economy is this fog of uncertainty,” said Mark Vitner, an economist at Wells Fargo.
One major factor behind the uncertainty: Congress and the White House agreed on Oct. 16 to reopen the government – but only until Jan. 15, when a new deal must be reached. That raises the threat of another shutdown.
The most recent reports have pointed to a weak economy, though there are a few bright spots:
• Consumer confidence fell to a six month low in October, according to the private Conference Board. The partial shutdown made Americans more pessimistic about future growth and hiring. Lynn Franco, director of economic indicators at the board, said the “temporary nature” of the budget agreement means that confidence could fluctuate in coming months.
• Retail sales rose modestly in September outside of auto sales, the Commerce Department said. Auto sales dropped 2.2 percent, the most in almost a year. But that was mostly because of a calendar quirk that shifted Labor Day weekend sales to August. Sales rose in most other areas, including restaurants, electronic and appliance stores, and sporting goods stores, a sign Americans were willing to spend on items that weren’t essential.
• Higher interest rates and rising home prices discouraged many Americans from buying existing homes in September. A measure of signed contracts reached its lowest level in nine months. The National Association of Realtors’ index of pending home sales fell below the level it had reached a year earlier.
• Orders for most long-lasting U.S. factory goods dropped last month as businesses cut back on spending. The decline suggested that businesses weren’t confident about the economy. And U.S. factories only slightly boosted their output in September, mostly because auto production rose.
• Hiring has slowed. Employers added an average of just 143,000 jobs a month from July through September. That was down from an average of 182,000 in April through June and from 207,000 in the first three months of the year. The unemployment rate dipped to a still-high 7.2 percent in September from 7.3 percent in August.
Despite some clear signs of a strengthening economy, the state of mortgage rates confuse some of this confidence.
David Berson, chief economist at Nationwide Financial, noted that rising mortgage rates typically coincide with a strengthening economy and increased hiring. Normally, additional jobs offset the dampening effect of higher rates. The average rate on a 9-year mortgage rose to a two-year high of 4.58 percent in August and remained near that level in September. It has since fallen back to 4.13 percent.
“But not this time,” Berson said. “This time we only had the rise in mortgage rates. We haven’t gotten the jobs.”