US consumer confidence dropped this month to the lowest since July on more pessimistic views about the economic outlook, even as current conditions improved.
(Bloomberg) — US consumer confidence dropped this month to the lowest since July on more pessimistic views about the economic outlook, even as current conditions improved.
The Conference Board’s index decreased in April to 101.3 from 104 in March, data out Tuesday showed. The median forecast in a Bloomberg survey of economists called for a reading of 104.
A measure of expectations — which reflects consumers’ six-month outlook — fell to 68.1, also the lowest since July. However, the group’s gauge of current conditions advanced to 151.1.
“Consumers became more pessimistic about the outlook for both business conditions and labor markets,” said Ataman Ozyildirim, senior director of economics at the Conference Board.
“While consumers’ relatively favorable assessment of the current business environment improved somewhat in April, their expectations fell and remain below the level which often signals a recession looming in the short term.”
The figures suggest consumers are turning sour on the economy amid expectations that the labor market will soon begin to soften. Layoffs are swirling and companies are posting fewer job openings, and those trends will accelerate in the event of a recession.
While more consumers said jobs were “plentiful” in April and fewer reported that jobs were hard to get, their expectations for six months from now deteriorated. Only 12.5% expect more jobs to be available in the coming months, the lowest in nearly seven years.
The difference between the current “plentiful” and “hard-to-get” measures — a metric watched closely by economists to gauge the tightness of the labor market — ticked up after a sizable drop in March.
Moreover, inflation is still widespread and running well above the Federal Reserve’s target. And financial stress from several bank failures is making it harder for consumers to get loans, which could depress spending and sentiment further.
“Respondents like what they are currently seeing and think that their own finances will be OK but have a generalized concern that the broader economy may weaken,” Stephen Stanley, chief US economist at Santander US Capital Markets LLC, said in a note. “That seems better than if they were seeing actual negative developments or were worried about their own finances.”
What Bloomberg Economics Says…
“April’s drop in consumer confidence could be an initial response to a tighter supply of credit, a consequence of recent banking turmoil that’s adding to economic headwinds.”
— Eliza Winger, economist
To read the full note, click here
Buying plans for cars, homes and major appliances all fell. Fewer consumers reported intentions to take a vacation in the next six months.
A separate report Tuesday showed sales of new US homes increased in March to the highest level in a year, suggesting an easing in mortgage rates is helping the housing market find some footing.
The median inflation rate seen over the next 12 months edged lower, according to the Conference Board. Data out Friday is anticipated to show the Fed’s preferred core inflation metrics continued to rise at a solid clip last month.
–With assistance from Chris Middleton.
(Adds Bloomberg Economics comment)
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