Complete Property Market Updates of Singapore

April 27, 2008

US consumer confidence takes a beating

Filed under: General — Propertymarketupdates @ 4:26 am

Indicator hits lowest point in 26 years over inflation, jobs

US consumer confidence fell to its lowest in more than a quarter-century in early April, diving deeper into recessionary territory on heightened worries over inflation and jobs, a survey showed yesterday.

The Reuters/University of Michigan Surveys of Consumers said its preliminary index of confidence fell to 63.2 in April from 69.5 in March – well below economists’ median expectation of a slight fall to 69.0, according to a Reuters poll.

The April result is the lowest since March 1982’s level of 62.0, when the ’stagflationary’ period of low growth and high inflation was still fresh in the memory of many Americans.

Near-term inflation expectations measured by the survey jumped to the highest since the turmoil following Iraq’s invasion of Kuwait in late 1990, which caused oil prices to rise sharply.

‘It’s really bad,’ Carl Lantz, interest rate strategist at Credit Suisse in New York, said about the report.

‘It confirms what we already know now that we are in a consumer-led recession, and it’s going to be a pretty protracted one.’

‘The consumer’s feeling increasingly hemmed in,’ said Brian Bethune, director of financial economics at Global Insight Inc in Lexington, Massachusetts. ‘They’ve got higher energy bills, higher gasoline bills, higher food bills and obviously the employment markets are nowhere near as strong as they were. The economy is in a recession.’

On Wall Street, stocks extended their losses and the dollar fell further versus the yen.

Government bond prices, which generally benefit from weak economic data, briefly extended their gains.

Yesterday morning, the Dow was 141.27 points or 1.12 per cent lower at 12,440.71, while the Nasdaq was 1.31 per cent down at 2,321.01 points, a fall of 30.69 points.

The report’s reading of one-year inflation expectations jumped to 4.8 per cent – the highest since a similar reading in October 1990 – from 4.3 per cent in March.

Five-year inflation expectations rose to 3.1 per cent – the highest since December 2007 – from 2.9 per cent in March.

The index of expectations for personal finances fell to 97, the lowest since April 1980 when it was 94, from 112 in March.

The index of current personal finances fell to 87, its lowest since November 1982 when it was 85, from 93 in March.

‘The April loss was due to rising inflation and shrinking income gains,’ the Reuters/University of Michigan Surveys of Consumers said in a statement.

‘There have only been a dozen other surveys that have recorded a lower level of consumer sentiment in the more than 50-year history of the survey.’

‘It’s a pretty dismal report. Consumer sentiment is at levels last seen in the 1980s and not seen in the last two downturns,’ said Cary Leahey, economist at Decision Economics, New York. ‘Consumers have a lot of reasons to be in a funk: high real oil prices, a stalled labour market, falling home prices, rising inflation and a credit crunch.’

Meg Browne, currency strategist at Brown Brothers Harriman in New York, said: “It is much weaker than expected. This is an April number, so one of the first reads on April. It suggests what we know, that the US economy in the first half will be stagnant. The Fed has already noted the risk of recession in the first half and the dollar hasn’t reacted aggressively. We are in a technical market rather than a fundamental one.” – Reuters, Bloomberg

Source : Business Times – 12 Apr 2008

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