Consumer confidence jumps in April
Apr 28th 2009 11:45AM
Updated Dec 4th 2009 11:38AM
The Conference Board's April consumer confidence report is a classic case of a data point that can be seen as either good news or bad, depending upon your disposition.
The optimists' view is that consumer confidence jumped more than 12 points in April to 39.2 from 26.9 in March. It was the monthly index's biggest gain since 2005 and the index is now at its highest level since November 2008. A Bloomberg News survey of economists had expected the index to rise to only 30.0 in April.
The glass-half-empties, on the other hand, will point out that consumer confidence is still at a relatively low level, in-line with economic conditions that have led to the nation's longest and deepest recession in more than a generation.
What accounts for the April jump in consumer confidence despite high unemployment? The headline consumer confidence number tends to follow the stock market: when the stock market rises -- as it has this spring -- consumer confidence tends to trend up, so the rise is not completely unexpected.
New consumer attitude toward the economy?
Maxwell Clarke, chief economist for IDEAglobal, said Tuesday he believes the recent data on a variety of fronts shows an improving outlook by consumers.
"There's definitely caution, but it pales in comparison to what we saw in the second half of 2008," Clarke told Bloomberg News. "By the second half, we may see a decided increase in consumer spending."
The Conference Board board said consumers' evaluation of present-day conditions improved moderately in April. Those claiming business conditions are "bad" decreased to 45.7 percent from 51.0 percent, while those claiming business conditions are "good" increased slightly to 7.6 percent from 6.9 percent.
Meanwhile, consumers' assessment of the job market was mixed compared to last month. Those saying jobs are "hard to get" decreased to 47.9 percent from 48.8 percent, while those claiming jobs are "plentiful" edged down to 4.5 percent from 4.7 percent.
The board said consumers' short-term expectations improved substantially in April, but the metric nevertheless remains at a very low level. Consumers expecting business conditions to worsen over the next six months decreased to 25.3 percent from 37.8 percent, while those anticipating business conditions to improve increased to 15.6 percent from 9.6 percent in March.
Economic Analysis: Recently, both institutional investor and typical investor money has flowed to the stock market, and consumer sentiment has moved in lockstep with this rise.
Still, investors should not become overly bullish on the April consumer confidence data: The Confidence Board index remains at a low level, and there are ample objective data points (corporate earnings, corporate revenue, unemployment rate) to project a continued recession for the U.S. economy for at least one to two more quarters. Moreover, the swine flu, or H1N1 flu, could further contract trade and GDP, if the influenza strain spreads and restricts international business travel.
Bottom Line: Confidence rise aside, there's still more than enough to be concerned about regarding the U.S. economy.