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Consumer Confidence Withstands Boston Bombing

May 31, 2013 By: Newswire

bostonConsumer confidence was not negatively affected by the Boston marathon bombing, according to Richard T. Curtin, Director, Thomson Reuters/University of Michigan Surveys of Consumers.

"Although confidence posted significant declines in early April, it began to improve prior to the bombing and gained strength throughout the rest of the month. Even when consumers were asked to describe in their own words their economic situation and that of the nation as a whole, there were virtually no references to the Boston marathon bombing. Of course, this does not mean that people did not grieve at the human tragedy, only that consumers did not think the events in Boston would influence national economic prospects,” Curtin said in his analysis of the April report.

The overall level of confidence declined in April from March, but was identical to last April reading.Most of the April loss was in how consumers viewed future economic prospects. In particular, consumers were less optimistic about the ability of the economy to continue to expand without a renewed downturn sometime in the next five years, the survey said.

"The strengths in consumer spending are now attributable to gains in household wealth, including rising home values and stock prices as well as reduced debts. Indeed, favorable attitudes toward vehicle and home buying conditions continued to point toward improved sales of homes and vehicles during the year ahead.These improved trends have been particularly strong among upper income households," according to the consumer survey.

Rising Home Prices Expected to Continue: Rising home values were reported by the highest number of homeowners since late 2007, although it was still less than half of the 2005 peak of 76 percent. The recent rise in home values as well as expected gains during the years ahead were heavily concentrated among households in the upper third of the income distribution. During the past three months, the upper income households expected an annual gain of 2.8 percent in the value of their home over the next five years, compared with just 0.3 percent by households in the lower third of the income distribution.

Incomes and Jobs Still Top Concern: Just one-in-four consumers in the April survey anticipated a decline in the unemployment rate during the year ahead. When asked about anticipated income gains, half expected no gain in their household incomes during the year ahead, and half of all consumers thought there was less than a 25 percent chance of an increase in their inflation-adjusted income gain during the next five years.

The Sentiment Index was 76.4 in the April 2013 survey, down from 78.6 in March and equal to last April’s reading. The Expectations Index recorded the largest decline, falling to 67.8 in April from 70.8 in March and 72.3 recorded in the April 2012 survey. The Current Economic Conditions Index was 89.9 in April, slightly below the 90.7 in March but well above the 82.9 recorded last April.


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By Newswire | May 31, 2013
The strengths in consumer spending are now attributable to gains in household wealth.
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