Consumer Confidence Takes a Surprising Turn

Despite a sluggish economy and political bickering, consumer confidence made a surprising jump in April. However, it is too soon to tell if the momentum will last.

The index of consumer attitudes rose to 68.1 in April, compared to an upwardly revised 61.9 in March, according to The Conference Board, an industry group. Analysts polled by Reuters expected the index to only reach 60.8 in April. March was originally reported at 59.7. Meanwhile, estimates in a Bloomberg survey ranged from 54.5 to 66.5.

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Lynn Franco, Director of Economic Indicators at The Conference Board, explains, “Consumer Confidence improved in April, as consumers’ expectations about the short-term economic outlook and their income prospects improved. However, consumers’ confidence has been challenged several times over the past few months by such events as the fiscal cliff, the payroll tax hike and the sequester. Thus, while expectations appear to have bounced back, it is too soon to tell if confidence is actually on the mend.”

Other sentiment gauges provided by The Conference Board also showed improvement. The Present Situation Index increased to 60.4 from 59.2, while the Expectations Index improved to 73.3 from 63.7. The assessment of people claiming business conditions are “good” increased to 17.2 percent in April, compared to 16.4 percent in the prior month. The number of people saying business conditions are “bad” fell to 28.1 percent from 29.1 percent.

Sentiment about the labor market is mixed. Those saying jobs are “plentiful” edged higher to 9.8 percent, compared to 9.5 percent in March. However, those saying jobs are “hard to get” increased to 37.1 percent from 35.4 percent.

Although overall consumer confidence improved in April, many doubt how long the bounce can last, as recent reports on consumers are not encouraging. The Commerce Department announced earlier this week that consumer spending on services jumped 0.7 percent, mostly due to higher utility bills. Meanwhile, personal incomes only gained 0.2 percent, half of the estimated 0.4 percent gain. The savings rate in the first three months of the year fell to 2.6 percent, compared to 4.7 percent in the fourth quarter.

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