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Consumer confidence in the United States of America has taken a battering as the government prepares to pull some of its stimulus.
Last week the US central bank increased the rate it charges banks for loans in a sign that it is moving to drain some of the emergency liquidity it pumped into the financial system at the heights of the credit crisis.
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However, the central bank’s decision directly affected consumer confidence, which dropped from 56.5 in January to 46 in February, according to the Conference Board Consumer Sentiment Index.
This drop in consumer confidence was also reflected in the number of mortgage loan applications submitted throughout February to date.
According to the Mortgage Bankers Association (MBA), the volume of mortgage applications dropped by 8.5 per cent – on a seasonally adjusted basis.
“Purchase applications fell, another indication that housing demand remains relatively weak,” MBA’s vice president of research and economics Michael Fratantoni said.
“With home prices continuing to drift amid an abundant inventory of homes on the market, potential homebuyers do not see any urgency to lock in purchases.”
