Consumer confidence slips, but remains higher than expected
By Hope Yen AP Business Writer
NEW YORK (AP) – Consumer confidence fell in April from a seven-month high, hurt by anxiety about unemployment and rising energy prices, suggesting wavering optimism about the economy in the months ahead.
The New York-based Conference Board said Tuesday that its Consumer Confidence Index fell to 108.8 this month from a revised 110.7 in March. Still, April’s reading beat analysts’ expectations of 107.5.
“It’s a bit disappointing with the decline, but confidence still remains quite a bit better than late last year,” said Gary Thayer, chief economist at A.G. Edwards & Sons Inc. “Consumer confidence seems to be in a holding pattern right now.”
The industry group’s index, based on a monthly survey of some 5,000 U.S. households, is closely watched because consumer confidence drives consumer spending, which accounts for about two-thirds of the nation’s economic activity.
Oscar Gonzalez, economist at John Hancock Financial Services, said consumers remain wary even though the economy appears to have turned a corner.
“Volatility in the Middle East, relatively high debt loads, a stock market gasping for air and a job market that isn’t improving quickly aren’t stopping consumers, but these factors are weighing on them,” he said.
Unemployment rose last month to 5.7 percent, even as U.S. companies added jobs in March for the first time in eight months. In the meantime, the Labor Department reported that energy prices shot up 3.8 percent in March, the biggest increase in 10 months.
The confidence index compares results to its base year, 1985, when it stood at 100. Before falling in April, consumer confidence was at its highest since August, when the reading stood at 114 prior to the Sept. 11 attacks.
To help boost the economy, the Federal Reserve slashed short-term interest rates 11 times last year. Citing signs of a rebound, the Fed opted to leave rates – now at 40-year low- unchanged in January and March. Many economists believe the central bank will hold rates steady at its May 7 meeting and possibly into the summer.
Despite April’s dip in confidence, many economists believe that strong consumer spending will continue bolstering the economy for the next several months.
“We have recently been reminded that oil price increases can have an effect on the economy, but the consensus is that all but the most severe shocks – which we have not yet seen – would not be large enough to derail activity,” said Richard Clarida, the Treasury Department’s assistant secretary for economic policy, on Tuesday.
In its report, the Conference Board said consumers’ assessment of current business conditions eased slightly. Those rating conditions as good declined to 19.7 percent from 21.0 percent in March. Consumers who felt business conditions were bad rose to 19.4 percent from 18.3 percent.
Consumers reporting that jobs currently were plentiful inched up to 20.9 percent from 20.6 percent, while those claiming jobs were hard to get also increased, to 22.5 percent from 21.1 percent.
Regarding prospects for the next six months, consumers were mixed. Those expecting an improvement in business conditions increased to 26.1 percent from 25.4 percent, while consumers expecting conditions to worsen also rose, to 6.4 percent from 6.2 percent in March.
As to their job outlook, 22.4 percent of consumers expect more jobs to become available in the next six months, up from 20.7 percent last month. Those expecting fewer jobs rose to 14.7 percent from 13.5 percent.
About 21.2 percent of consumers expect their incomes to increase, down from 22.7 percent in March, the board reported.
The Conference Board is a nonprofit research and business group, with more than 2,700 corporate and other members around the world.
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