Tags: us | economy | Consumer | Confidence | Rises | Inflation | Job

Rising Inflation Fails to Dampen Consumer Confidence

Tuesday, 26 April 2011 10:05 AM

Confidence among U.S. consumers increased more than forecast in April, signaling the improving labor market is helping Americans weather rising fuel costs.

The Conference Board’s confidence index rose to 65.4 from a revised 63.8 reading in March, figures from the New York-based private research group showed today. The median forecast of economists surveyed by Bloomberg News called projected an advance to 64.5.

Six straight months of job growth along with joblessness at a two-year low in March are helping sustain consumer purchases, which account for about 70 percent of the economy. At the same time, bigger gains in sentiment may be difficult as households spend more for food and gasoline, which is at the highest level in almost three years.

“Confidence is picking up on the back of an improving labor market and rising stock prices, which are offsetting higher gasoline costs,” said Sal Guatieri, a senior economist at BMO Capital Markets Inc. in Toronto. “Consumers will have both the confidence and the income to keep spending.”

Stocks held earlier gains after the report on optimism over improving corporate earnings. The Standard & Poor’s 500 Index rose 0.4 percent to 1,340.8 at 10:17 a.m. in New York. Treasury securities rose, sending the yield on the benchmark 10-year note down to 3.34 percent from 3.37 percent late yesterday.

Home Prices

Another report today showed residential real estate prices dropped in February by the most in more than a year, a sign the housing market is struggling to stabilize.

The S&P/Case-Shiller index of property values in 20 cities fell 3.3 percent from February 2010, the biggest year-over-year decrease since November 2009.

Estimates for consumer confidence ranged from 57 to 68 in the Bloomberg survey of 69 economists. The measure averaged 97 during the expansion that ended in December 2007.

The group’s measure of present conditions increased to 39.6, the highest since November 2008, from 37.5 a month earlier. The gauge of expectations for the next six months rose to 82.6 from 81.3.

The share of consumers who said jobs are currently plentiful rose to 5.2 percent from 4.6 percent. Those who said jobs are hard to get decreased to 41.8 percent, the fewest since January 2009, from 44.4 percent.

Jobs Outlook

The outlook was less rosy. The percent of respondents expecting more jobs to become available in the next six months decreased to 17.5 from 19.6 the previous month. The share expecting incomes to rise over the next six months improved to 16.7 percent from 15.2 percent.

The report contained one positive bit of news for the housing market, which has lagged behind other parts of the economy since the recession ended in June 2009. The share of Americans planning to buy a house over the next six months increased to 5.5 percent, matching the record high reached in January 1978. Data go back to 1964.

Intentions to purchase automobiles and appliances also improved.

Fuel costs may be preventing bigger gains in confidence. The average price of regular fuel climbed to $3.87 a gallon yesterday, the highest level since August 2008, according to AAA, the nation’s biggest motoring organization.

Confidence ‘Fragile’

“The economic climate is still less than ideal, from a slow and uneven recovery to significantly rising commodity costs and fragile consumer confidence,” Jim Skinner, chief executive officer of McDonald’s Corp. (MCD), said on a conference call with analysts on April 21.

Oak Brook, Illinois-based McDonald’s, the world’s biggest restaurant chain, reported an 11 percent jump in first-quarter profit, fueled by U.S. demand for coffee and burgers, and predicted further increases in food costs this year.

Today’s report was foreshadowed by other figures. The Bloomberg Consumer Comfort Index climbed in the week ended April 17 to the best level since the end of February, posting the fourth consecutive gain. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose more than forecast in April, after a March reading that was the lowest since November 2009.

The economy created 216,000 jobs last month, the most since May, and the jobless rate fell to a two-year low of 8.8 percent. Data from the Labor Department due on May 6 may show payrolls climbed again this month, according to the median forecast in a Bloomberg survey.

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Confidence among U.S. consumers increased more than forecast in April, signaling the improving labor market is helping Americans weather rising fuel costs. The Conference Board s confidence index rose to 65.4 from a revised 63.8 reading in March, figures from the New...
Tuesday, 26 April 2011 10:05 AM
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