Key consumer data boosts US hopes
Washington, May 12, 2012
US consumer sentiment rose to its highest level in more than four years in early May as Americans remained upbeat about the job market, a survey released showed.
Separate data earlier in the day showed US producer prices unexpectedly fell in April as energy costs dropped by the most in six months, a sign of easing inflation pressures that could give the Federal Reserve more room to help the economy should growth weaken.
The Thomson Reuters/University of Michigan's preliminary May reading on the overall index on consumer sentiment improved to 77.8 from 76.4 in April, topping forecasts for a small decline to 76.2.
It was the highest level since January 2008.
Despite the recent slowdown in job growth, nearly twice as many consumers reported hearing about new job gains than said they had heard about recent job losses, the survey said.
Even so, consumers were only slightly more optimistic about declines in the unemployment rate than they were a year ago, with only one in four expecting it to fall in the year ahead.
However, economists polled by the Philadelphia Federal Reserve, expect the US unemployment rate to average 8.1 per cent this year, and to fall to 7.7 per cent next year. Employers cut back on hiring in April and March after an acceleration at the start of the year. April's unemployment rate eased to 8.1 per cent as more people dropped out of the work force.
In a potential harbinger of increased spending, consumers' buying plans for vehicles and durable goods improved at the beginning of the month, with 65 per cent saying buying conditions were favourable, the highest level in more than a year.
'Households are feeling more comfortable. It's pretty good news for consumer spending,' said Gus Faucher, senior macroeconomist at PNC Financial Services in Pittsburgh.
Also yesterday, the Labour Department said its seasonally adjusted producer price index dropped 0.2 per cent last month. That was the first drop this year and the biggest decline since October.
'Looking ahead consumer prices should remain contained,' said Michelle Meyer, an economist at Bank of America Merrill Lynch in New York.
Economists polled by Reuters had expected prices at farms, factories and refineries to be flat last month.
A rise in petrol prices last year pinched consumers and fuelled higher inflation, but the Fed has maintained that the increase would be temporary. A report on consumer prices due next week is expected to give further signs that inflation is ebbing.
Still, the annual inflation rate targeted by the Fed continues to hover around the central bank's 2 per cent goal, and yesterday's price data did not appear to change investor's views on the outlook for monetary policy. – Reuters