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Consumer sentiment unexpectedly falls in April

Consumer sentiment unexpectedly falls in April

Consumer sentiment unexpectedly falls in April

US economy sees mixed week: Intel ( INTC ), UPS ( UPS ) and Bank of America ( BAC ) reported better-than-expected quarterly earnings and housing starts showed signs of stabilizing, but consumer sentiment dipped in unexpectedly to 69.5 in April (preliminary), Reuters/University of Michigan Surveys of Consumers said, Reuters reported on Friday. It was the lowest level of sentiment in five months.

Economists polled by Bloomberg News had forecast the index rising 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 consumer expectations index, a leading indicator, fell to 62.3 in April from 67.9 in March, while the index of current conditions fell to 80.7 in April from 82.4 in March, a Reuters reported. The one-year inflation expectations index rose to 2.9 in April from 2.8 percent in March, and the five-year inflation expectations index was unchanged at 2.7 percent.

Consumers concerned about their own jobs, finances

Richard Curtin, director of surveys, said that consumers’ outlook on the US economy is upbeat, but Americans remain downbeat about their personal finances.

“Although consumers believe the overall economy will continue to improve, they still have fairly negative views of their own incomes and employment prospects,” Curtin said in a statement, Reuters reported.

Rising consumer sentiment typically precedes an increase in purchasing decisions, while falling sentiment portends that more people are holding back on purchases — and consumer spending accounted for 65 percent to 70 percent of U.S. GDP.

The University of Michigan Consumer Survey Center surveys 500 households monthly about their financial conditions and attitudes toward the economy.

Optimists will interpret this week’s news pointing to better-than-expected earnings from Intel, UPS, Bank of America and a nearly year-long expansion in industrial production as signs that the economic recovery is strengthening.

Instead, pessimists will point to the rise in initial jobless claims (although some of that rise was holiday-related) and the unexpected drop in consumer sentiment as signs that the goal of a sustainable expansion has yet to be reached.

Consumer sentiment will likely remain subdued until the US employment situation improves, and that will require months of at least adequate job gains.