Consumer Confidence Edges Up Despite Gloomy Forecasts
Business + Economy

Consumer Confidence Edges Up Despite Gloomy Forecasts


U.S. consumer confidence rose slightly this month, after dropping sharply in March, the Conference Board reported on Tuesday. The Consumer Confidence Index for April now stands at  65.4 (out of a scale of 100), up from the March number of 63.8.  The results from the monthly survey  were slightly higher than economists’ expectations. They’re only modestly above the levels seen over the last two years, but still far below the 90 or above reading that signals a healthy economy, a metric not reached since 2007.

“The underlying foundation is the job market and that continues to improve, helping to offset the price shock at the gas pump,” Lynn Franco, director of the Conference Board Consumer Research Center, told The Fiscal Times.  “As long as we continue to add jobs, we will move in the right direction.”

Claims for unemployment insurance have fallen and there has been six straight months of job growth. The March unemployment rate stood at 8.8 percent.

Consumers’ assessment of the labor market was more favorable this month than in March, according to the index. Those saying jobs are “hard to get” declined to 41.8 percent from 44.4 percent, while those stating jobs are “plentiful” increased to 5.2 percent from 4.6 percent. Future job gains also helped to drive the April increase.

Mark Vitner, economist with Wells Fargo, remains cautiously optimistic. While the Index was an improvement, it doesn’t signal strength in the economy, he said. “Confidence is not likely to go up meaningfully until gas prices and unemployment come substantially down,” he said in a research note. The average price of gas is $3.85, and has risen $.30 over the last month.

Buying Plans Looking Up
In response to a better assessment of the job market and increased income, 49.1 percent of consumers plan to buy a major appliance, up from 43.8 percent in March, according to the report. Those consumers planning to purchase a car increased to 12.4 percent, while 5.5 percent of survey respondents plan to purchase a home, up from 4.1 percent in March.

Consumers’ appraisal of present-day conditions, though mixed, improved in April, for the seventh straight monthly gain. Those stating conditions are “good” decreased slightly, to 14.8 percent from 15.0 percent. Those stating business conditions are “bad” also declined slightly, to 36.4 percent from 36.6 percent. Consumers’ short-term outlook, which had soured in March, improved moderately in April, suggesting that the uncertainty expressed last month is easing, Franco said.

The “expectations” index – a sub-index that measures overall consumer sentiment regarding the short-term economic situation – rose  to 82.6 up from 81.3 in March. Inflation expectations, which had spiked in March to 6.7 percent, retreated somewhat in April, to 6.3 percent, but still remain high. Income expectations also improved to 16.7 percent, up from 15.2 in March.

The confidence report may bode well for  Federal Reserve Chairman Ben Bernanke’s statement and rare press conference on Wednesday, suggest some economists. “The Fed will be pleased to see that the further rise in gasoline prices towards $3.90 a gallon does not appear to have put another dent in U.S. consumer confidence or added to households' inflation expectations,” said Paul Dales, with Capital Economics.

“This should be the year that confidence returns to normal, rather than recessionary levels,” said Scott Hoyt, economist with Moody’s Analytics. “Accelerating job gains will be the primary catalyst, although the broad strength in the economy will provide other supports as well.”

Related Links:
Consumer Confidence Rises in April (MarketWatch)
Consumer Confidence Rose Slightly in April (NPR)
Consumer Confidence Rose More Than Forecast in April (Bloomberg)