Consumer confidence slipped back in April to 94.2, versus an expected reading of 95.8. The change was driven entirely by the expectations component, which dropped to 79.3 from 83.6 in March. This moves the expectations component back below 80, which is the lower band of its range in a normal recovery. The assessment of the present situation improved in April from 114.9 to 116.4.
The rise in the present situation was due to sentiment toward both business and employment conditions being less bad. Those who found “jobs plentiful” decreased, but those who found “jobs hard to get” decreased by more, to 22.7% from 25.2%. Those describing business conditions as “good” fell to 23.2% from 24.9%, but those seeing them as ‘bad’ fell more from 19.2% to 18.1%. With regard to consumers’ expectations, sentiment toward viewing business conditions as “better” was lower at 13.4%, and expectations for “more jobs” were also lower at 12.2% from 13.0%. Those anticipating higher incomes also decreased, to 15.9% from 16.9% in March, while those who expected a decrease in income fell slightly to 11.2% from 12.3%. The percentage of respondents planning to buy a home was lower at 5.4%. Plans to purchase a new home was a little higher at 1.0% from 0.8%.
Following what has been a pretty weak first quarter, today’s consumer sentiment report for April suggests that consumers are unfortunately not expected much of an improvement through the second quarter. While they continue to see economic conditions as roughly the same at present, their outlook has clearly softened. This is slightly at odds with the employment data, which has continued to show healthy growth; in addition, the participation rate has now risen from 62.4% to 63.0%—a significant move over the last few months and possibly suggests that consumers are positive enough about economic prospects to start looking for work again. As far as the Fed is concerned, it is not planning on raising interest rates again at tomorrow’s meeting, though if consumer sentiment continues to remain soft, already questionable expectations for a June increase will also start to come under much further pressure.
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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.