LegalShield Law Index: Consumer Confidence Continuing to Ease, But Still At Healthy Levels
- The Consumer Financial Stress Index increased in Q2, suggesting consumer confidence may slip in coming months
- Overall, however, the Index remains at healthy levels, suggesting that a recession in 2019 is unlikely
ADA, Okla.--(BUSINESS WIRE)--Released today, the 2nd Quarter 2019 LegalShield Law Index, a suite of leading indicators of the economic and financial status of U.S. households and small businesses, indicates that consumer confidence may continue to ease in the coming months.
“However, a strong rebound in mortgage demand does not appear to be likely given current affordability levels.”
The LegalShield Consumer Financial Stress Index (CFSI) increased, or worsened, by 2.9 points in Q2 to 77.3, its highest level in 18 months. Overall, however, the Index remains at healthy levels, and confidence is likely to remain elevated by historical standards — suggesting that a recession this year is unlikely.
Meanwhile, the Conference Board’s Consumer Confidence Index fell nearly 10 points to 121.5 in June and is down 2.7 points compared to last quarter. While consumer optimism remains elevated, confidence in the U.S. economy has declined over the last six to nine months. Consumer spending grew in Q1 at its second weakest pace since Q2 2013. However, the combination of historically low unemployment, rising household net worth, and record-high stock prices should keep consumers on good footing as the economic expansion enters its 11th year.
“Though the LegalShield Consumer Financial Stress Index increased in the second quarter, consumers remain on good footing despite some recent dips in confidence,” said Scott Grissom, Senior Vice President and Chief Product Officer, LegalShield. “With this being said, we wouldn’t be surprised to see a slow build in consumer financial stress in the coming months, reflecting weak growth in real disposable income, falling demand for credit card loans, and a softening global outlook.”
The LegalShield Housing Activity Index, a leading indicator of housing starts, increased 2.4 points from the first quarter’s revised level to 113.6 in Q2 – its highest point in three years – but does not point to a resurgence in building activity over the next quarter.
Meanwhile, housing starts rose to an annualized rate of 1.27 million in May but are essentially unchanged since early 2017. Despite this quarter’s improvement in building activity, the NAHB-Wells Fargo Housing Market Index posted its first decline in 2019 as the combination of trade tensions and a tight labor market inflate the price of supplies and labor for homebuilders.
Similarly, the LegalShield Real Estate Index, a leading indicator of existing home sales, signals purchasing activity may improve in the short-term, but a strong rebound appears unlikely given current affordability levels. The index increased 3.5 points to 103.7 in Q2, its highest level since Q4 2016.
“Looking ahead, this quarter’s reading of the LegalShield Real Estate Index suggests that existing home sales may further improve later this year, particularly if mortgage rates remain below four percent,” Grissom added. “However, a strong rebound in mortgage demand does not appear to be likely given current affordability levels.”
The LegalShield Bankruptcy Index decreased (improved) 1.5 points to 49.4 in Q2 and is down 1.1 percent year-over-year. Meanwhile, bankruptcies climbed 2.9 percent in Q2 compared to year-ago levels but remain low by historical standards.
The LegalShield Foreclosure Index increased (worsened) 2.1 points to 60.6 in Q2 and is up roughly seven percent from a year ago. The Index continues to closely track foreclosure starts, which edged down in Q1 to historic lows according to the Mortgage Bankers Association. Although the housing market faces significant headwinds, consumer financial stress is low and foreclosure activity remains muted.
The quarterly LegalShield Law Index reflects the demand for legal services among the company’s provider law firms in all 50 states. The Law Index is a suite of leading indicators of the economic and financial status of U.S. households and small businesses, including the LegalShield Foreclosure Index in addition to the Consumer Financial Stress Index, Housing Activity Index, Real Estate Index, and the Bankruptcy Index.
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