Companies also believe first quarter winter blues are over and that the economy will rebound, reports Team IFM
New York, May 30: In a nod to a US government statement earlier this month that the unemployment pool shrank in April reflecting the resilience in the economy, an independent research organisation has found Americans to be upbeat about the future, the economy and the employment outlook.
The report by The Conference Board, a New York-based economy tracker, said its consumer confidence index had risen 83.0 in May from a revised 81.7 in April, which had initially been estimated at 82.3.
“Consumer confidence improved slightly in May, as consumers assessed current conditions, in particular the labour market, more favourably,” said Lynn Franco, Director of Economic Indicators at The Conference Board, in a statement.
The report, released on Tuesday, was also in line with Federal Reserve Chair Janet Yellen’s assertion on April 30 that growth in economic activity had “picked up recently” after having slowed sharply during the winter in part because of adverse weather conditions.
Consequently, Yellen said, the Fed Reserve had decided to it reduce stimulus by another $10 billion to $45 billion a month despite unattractive first quarter growth numbers. “Labour market indicators were mixed but on balance showed further improvement,” a Fed Reserve statement said.
Two days later on May 2, the US Labour Department said April saw job numbers swell by 288,000 new recruitments – the highest number of hiring in two years – reflecting a pick-up in the economy after a severe winter had stymied growth.
The department also said the unemployment rate had contracted to 6.3 percent in April from 6.7 percent the preceding month. This was the lowest level since September 2008, when Lehman Brothers collapsed triggering the global meltdown.
Moreover, it said, altogether 238,000 jobs were added in the February-April period, up from 167,000 in the previous three months.
The upswing in recruitments “signals that American companies are optimistic the economy will snap back smartly after the largely weather-related slump in the first quarter,” Associated Press quoted Sal Guatieri, an economist at BMO Capital Markets, as saying.
CONFIDENCE UP
The Conference Board Consumer Confidence Index definitely reflected this, improving moderately in May after having decreased in April.
The Index now stands at 83.0 (1985=100), up from 81.7 in April. The reading was also in line with estimates of economists surveyed by The Wall Street Journal, who had forecast a reading of 83.0.
The Present Situation Index which measures consumers’ view of current economic conditions, increased to 80.4 from 78.5, while the Expectations Index edged up to 84.8 from 83.9 in April.
Mirroring further the upbeat mood, in both cases the respective index was higher than the estimated; the Present Situation Index had initially estimated at a three-month low of 78, while the Expectations Index, a gauge of consumer expectations for the next six months’ economic activity, was originally put at 84.9.
The monthly Consumer Confidence Survey is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The cut-off date for the preliminary results was May 14.
“Expectations regarding the short-term outlook for the economy, jobs, and personal finances were also more upbeat,” said Board director Franco.
On consumers’ assessment of present-day conditions, the board said it improved in May, with those stating business conditions are “good” decreased to 21.1 percent from 22.2 percent, while those stating business conditions are “bad” declined to 24.1 percent from 24.8 percent.
Similarly, it said, consumers’ assessment of the labour market was more favourable. According to it, those claiming jobs are “plentiful” rose to 14.1 percent from 13 percent, while those claiming jobs are “hard to get” decreased slightly to 32.3 percent from 32.8 percent.
The percentage of consumers expecting business conditions to improve over the next six months edged up to 17.5 percent from 17.2 percent, while those expecting business conditions to worsen decreased marginally to 10.2 percent from 10.5 percent.
Consumers were more positive about the outlook for the labour market. The board said those anticipating more jobs in the months ahead increased to 15.4 percent from 14.7 percent, while those anticipating fewer jobs edged up to 18.3 percent from 18.0 percent.
The proportion of consumers expecting their incomes to grow increased to 18.3 percent from 16.8 percent, but those expecting a drop also increased to 14.5 percent from 12.9 percent.
“In fact, the percentage of consumers expecting their incomes to grow over the next six months is the highest since December 2007 (20.2 percent),” Franco said.
“Thus, despite last month’s decline, consumers’ confidence appears to be growing,” he summed up.
FEDS’ TAKE
The Conference Board report was an endorsement of the April 30 Federal Reserve statement that said labour market indicators were mixed but on balance showed further improvement, while growth of recovery in the economy was picking up.
“The unemployment rate, however, remains elevated. Household spending appears to be rising more quickly. Business fixed investment edged down, while the recovery in the housing sector remained slow,” a Federal Reserve statement had said.
“Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee’s (FOMC’s) longer-run objective, but longer-term inflation expectations have remained stable.”
The statement also said the FOMC sought to foster maximum employment and price stability, and that, with appropriate policy accommodation, economic activity would expand at a moderate pace and labour market conditions improve gradually.
“The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labour market conditions,” the statement concluded.