Consumer Sentiment Unexpectedly Plunges in April
Economists surveyed by Bloomberg News had predicted the index would rise to 75.0 in April (preliminary) from 73.6 in March (final). The index was at 73.6 in February, 74.4 in January, and 72.5 in December. The index hit a cycle low of 55.3 in November 2008, and the index's record low of 51.7 was set in May 1980.
Meanwhile, the index of consumer expectations, a leading indicator, fell to 62.3 in April from 67.9 in March, while the current conditions index declined to 80.7 in April from 82.4 in March, Reuters reported. The one-year inflation expectations index rose to 2.9 in April from 2.8% in March, and the five-year inflation expectations index was unchanged at 2.7%.
Consumers Concerned About Their Own Jobs, Finances
Richard Curtin, director of the surveys, said consumers' outlook on the U.S. economy is optimistic, but Americans remain downbeat about their personal financial situations.
"While consumers think the overall economy will continue to improve, they still hold quite negative views on their own income and job prospects," Curtin said, in a statement, Reuters reported.
Rising consumer sentiment usually precedes an increase in decisions to buy, while falling sentiment presages more people holding off purchases -- and historically consumer spending has accounted for 65% to 70% of U.S. GDP.
The University of Michigan's Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy.
Optimists will interpret this week's news by pointing to the better-than-expected earnings from Intel, UPS, Bank of America and the nearly year-long expansion of industrial production as signs that the economic recovery is strengthening.
Conversely, pessimists will point to the rise in initial jobless claims (although part of that increase was holiday-related) and the unexpected drop in consumer sentiment as signs that the goal of a sustainable expansion has not been achieved yet.
Consumer sentiment is likely to remain subdued until the U.S. employment situation improves, and that will require months of at least adequate job gains.