Strong US data sparks talk of Fed stimulus slowdown

New York

Data showing multi-year highs for both house prices and consumer confidence in the US pointed to strength in the world's largest economy yesterday, with the improved outlook refocusing attention on the possibility that the Federal Reserve might soon begin rolling back the stimulus measures that have been supporting activity across the country.

A widely followed index of house prices across 20 US cities showed that, in year-on-year terms, values had climbed by 10.9 per cent over March, the biggest rise since April 2006. The Standard & Poor's/Case-Shiller index had been expected to show a gain of 10.2 per cent. On a monthly basis, prices were up 1.1 per cent over March, once again topping forecasts, as the combination of rising sales and low inventories drove up home values.

American consumers, meanwhile, grew more confident in May, according to a separate report from the Conference Board industry group. Its index of consumer attitudes rose to 76.2 over the month, up from an upwardly revised reading of 69 for April. The result was the most positive since February 2008, before the financial crisis reached its peak later that year. Most economists had expected the index to rise to around 71.

The jump in consumer confidence, which drove up stock markets, could herald further improvements in jobs and the wider economy, as about 70 per cent of the US economy is accounted for by consumer spending.

The data comes just days after Ben Bernanke, the chairman of the US Federal Reserve, signalled to Congress that the central bank could take a decision to slow the pace of its bond-buying programme in the "next few meetings" of its policy-setting Open Market Committee (FOMC).

Currently, the Fed is purchasing $85bn in mortgage-related and government bonds to ensure the US economic recovery remains on track. But yesterday's data is likely to bolster the case of policymakers at the central bank who want to taper the bond buying programme earlier.

Last week, the minutes of the two -day FOMC meeting that concluded on 1 May showed that some hawks were thinking about narrowing the scope of the programme "as early as the June meeting".

Although that is still seen as unlikely – those who expressed a willingness to do so by June "differed about what evidence would be necessary and the likelihood of that outcome" – economists are increasingly factoring in some kind of readjustment by the end of this year.

Economists at HSBC, in a report published yesterday morning, forecast that the Fed will cut the level of its monthly bond purchases to $55bn in December.

In all, they anticipate that with the economy still some distance from being fully recovered, the central bank's purchases will range between $500bn-$600bn next year, down from what is expected to be a final figure of $1 trillion in 2013.

"This represents not a tightening, merely less aggressive easing," the HSBC report said.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Guru Careers: Communications Exec / PR Exec

£25 - £30K: Guru Careers: We are seeking a highly-motivated and ambitious Comm...

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

Day In a Page

On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific
In this the person to restore our trust in the banks?

In this the person to restore our trust in the banks?

Dame Colette Bowe - interview
When do the creative juices dry up?

When do the creative juices dry up?

David Lodge thinks he knows
The 'Cher moment' happening across fashion just now

Fashion's Cher moment

Ageing beauty will always be more classy than all that booty
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

Health fears over school cancer jab

Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

'I forgive everyone, but I don't forget'

Fifa president Sepp Blatter issues defiant warning to opponents
Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

Weather warning

Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

High hopes for LSD

Meet the volunteer users helping to see if it cures depression and addiction
German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

Saving Private Brandt

A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral