Consumer sentiment declined in April to nine-month low

Confidence among Americans fell in April to a nine-month low, which may point to a cooling in consumer spending, the biggest part of the economy.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment declined to 72.3 in April from 78.6 a month earlier. This month’s reading was lower than all 69 estimates in a Bloomberg survey that called for no change from the March number.

The figures are a sign Americans may be feeling the lagged effects of a higher payroll tax and they follow a report today that showed March retail sales fell by the most in nine months. At the same time, stock prices at all-time highs and rising property values are helping to improve household finances, which may keep spending from faltering.

“We’ve got some powerful cross-currents going on with consumer confidence,” Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado, said before the report. “We are coming off of these fairly sizeable payroll tax hikes from January.” Still, “when you look at actual spending, it’s been remarkable how firm spending was in January and February.”

Forecasts in the Bloomberg survey ranged from 74 to 84.5. The index averaged 64.2 during the recession that ended in June 2009, and 89 in the five years prior to the 18-month slump.

A report earlier today showed retail sales fell last month by the most since June, showing household spending ended the first quarter on softer footing. The 0.4 percent decrease followed a 1% gain in February, Commerce Department figures showed today in Washington. The median forecast of 85 economists surveyed by Bloomberg called for an unchanged reading in March. Department stores and electronics dealers were among the weakest showings.

Bloomberg Gauge

The Michigan survey compares with Bloomberg’s measure of sentiment, which has been little changed over the past four weeks, holding within a 0.5-point range. The Bloomberg Consumer Comfort Index was minus 34 in the week ended April 7 from minus 34.1 the prior period.

The Michigan survey’s current conditions index, which measures whether Americans think it’s a good time to make big investments and gauges consumers’ view of their personal finances, dropped to a preliminary reading of 84.8 in April, the lowest in nine months, from 90.7 in March.

The index of expectations six months from now, which more closely projects the direction of consumer spending, decreased to 64.2 this month from 70.8 in the prior period.

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