Yes, I feel so much better knowing that the same government that fixed the housing problem in New Orleans will be fixing the RE problem across the nation.
Here is a little harbinger of what is to come. An interesting point there is that one year inflation is expected to be 4.8% Consider the short term rates the Fed is running the printing press at, and you'll see how we are all collectively paying Wall St. for their incompetence, BIG TIME!
Consumer Spending
10:37 04/11 (CEP News) – The downside surprise to Friday's release of a sharper than expected slowdown in U.S. consumer sentiment form the University of Michigan is indicative for a weakening labour market and some possible slowing of consumer spending, according to economists.
According to preliminary data from Reuters and the University of Michigan, U.S. consumer sentiment fell sharply from March's final 69.5 to a score of 63.2, the lowest level since March 1982 when the index stood at 62.2. Economists were expecting a deterioration to 69.0.
Rishi Sondhi, economist with RBC Capital Markets, expects the data to translate into a pullback in consumer spending down the road. "It’s important to note that although confidence has cratered, the real consumer spending data released-to-date has shown a deceleration in spending, but no retrenchment as of yet… given that the University of Michigan’s measure does tend to track real consumer spending growth over the business cycle, the continued deterioration in this measure suggests an important downside risk to our consumption forecast which sees consumer spending growth remaining essentially flat in the first half of the year," he said.
The current conditions index fell to 78.4 in April from March's 84.2 level while the economic outlook index fell to 53.4 from 60.1.
"The current conditions index is a fair proxy for what is taking place in the labour market, and suggests that we are due further falls in the payroll series in the months ahead. Whilst the economic outlook indicator is probably of more relevance as an indicator of consumer spending," said ING Economist Rob Carnell.
The one-year inflation expectation jumped to 4.8% after rising to 4.3% in March.
"Consumers' would appear to be buying into the stagflation theme," according to a report from Bear Stearns following the announcement. "One-year inflation expectations have moved above the post-Katrina spike to the highest levels seen since 1982. In addition, the less volatile five-year inflation measure has moved to near the top of the range that has prevailed in recent years."
Five-year inflation rose to 3.1% from the previous 2.9% level.
"Still, this is unlikely to prevent the Fed from easing rates again at the April FOMC meeting," Carnell added.
Prior to the release, many economists had been calling for a downside surprise to the indicator based on poor data from earlier in March.
"The consensus forecast was always way too optimistic given the huge drop in the Conference Board's index, and this survey has gone some way to closing the gap," said Ian Shepherdson of HFE.
"Bearing in mind that more than half of all consumption is non-discretionary (food, energy, housing, etc.) this means discretionary spending will fall at a 1% rate or more, something we haven't seen since 1991," he added. "And there's no sign confidence has hit bottom yet."
The U.S. Conference Board's consumer confidence index unexpectedly declined to a reading of 64.5 in March despite forecasts for a reading of 73.5.
The flight to quality which began earlier in the day when General Electric earnings substantially missed expectations pushed further on the downbeat assessment, with U.S. Treasury yields falling to session lows following the release. The two-year yield fell to 1.72% from 1.76% and the 10-year decreased to 3.45% from 3.46%.
The Dow Jones Industrial Average fell an additional 0.4% following the University of Michigan survey. On the session, the index is down 147 to 12433 while the S&P 500 is down 14.40 to 1346.15. There was little market reaction in foreign exchange. |
