Rising home prices are improving household balance sheets, a source of strength for spending and the economy. Home prices rose 10.2% in the 12 months through February, the biggest increase in almost seven years, according to Irvine, California- based CoreLogic Inc.
Stocks are also adding to net worth, while cheaper prices at the gas pump give consumers more money to spend on other goods and services. The Standard & Poor’s 500 Index climbed for a fourth day yesterday, closing at a record high.
The average price of a gallon of regular gasoline was $3.56 yesterday, down from a recent high of $3.79 on Feb. 26, according to figures from AAA, the largest U.S. motoring group.
The labor market cooled in March. Payrolls grew by 88,000 last month, the smallest increase since June, the Labor Department said on April 5. Average hourly earnings were unchanged in March from the prior month, the weakest showing since October.
Workers are also paying higher payroll taxes. The levy that funds Social Security reverted in January to its 2010 level of 6.2% from 4.2%. A person earning $50,000 is taking home about $83 less a month as a result.
The challenges aren’t lost on some companies such as Matthews, North Carolina-based Family Dollar Stores Inc.
“Whether it’s the payroll tax increase, tax refund delays, gas prices or difficult weather comparisons, all of these factors make near-term trends difficult to predict,” Howard Levine, the company’s chief executive officer, said on an April 10 earnings call. “As we move into the second half of fiscal 2013, our discretionary sales continue to be challenged by both the financial pressures facing our customers as well as unseasonably cold spring weather.”
Consumers in today’s confidence report said they expect an inflation rate of 3% over the next 12 months, compared with 3.2% in March. Over the next five years, Americans expected a 2.8 percent rate of inflation, the same as in March.