Economy Shrugging off Spring Slowdown, Reports Suggest

Before you go, we thought you'd like these...
shoppers downtown portland oregon
Natalie Behring/Bloomberg via Getty Images
By Leah Schnurr and Lucia Mutikani

NEW YORK -- U.S. consumer sentiment rebounded in early May to the highest level in nearly six years as Americans felt better about their financial and economic prospects, particularly among upper-income households, a survey released on Friday showed.

The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment rose to 83.7 from 76.4 in April, topping economist expectations for 78.
Sponsored Links


It was the highest level since July 2007.

The barometer of current economic conditions jumped to 97.5 from 89.9, the highest since October 2007, while the gauge of consumer expectations gained to 74.8 from 67.8.

More consumers gave a favorable view of their personal finances than in anytime since 2007, with the largest gains among households in the upper third of income levels. More respondents also thought the economy would continue to improve in the year ahead.

Shopping plans were similarly encouraging, with the gauge of buying attitudes for durable goods rising to 148 from 137.

The survey's one-year inflation expectation was unchanged at 3.1 percent, while the survey's five-to-10-year inflation outlook edged down to 2.8 percent from 2.9 percent.

Economic Indicators Also on the Rise

A separate report released Friday showed U.S. economic activity in April rose to its highest level in nearly five years as firming housing and labor market conditions offset weakness in manufacturing, suggesting an anticipated growth slowdown would be temporary.

The Conference Board said Friday that its Leading Economic Index increased 0.6 percent to 95.0 last month, the highest level since June 2008. The index had slipped 0.2 percent in March.

Economists polled by Reuters had expected the index to rise only 0.2 percent in April.

Economic activity is expected to slow in the second quarter as the effects of higher taxes and deep government spending cuts kick in. However, housing and employment are showing some resilience, while manufacturing is showing some strain.

"The biggest positive factor is the potential for improvement in the recovering housing and labor markets," Ken Goldstein, an economist at the Conference Board, said in a statement. "The biggest unknown is the resiliency in confidence, both consumer and business."

10 PHOTOS
9 Numbers That'll Tell You How the Economy's Really Doing
See Gallery
Economy Shrugging off Spring Slowdown, Reports Suggest
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION
Read Full Story

People are Reading