Tuesday, April 28, 2009

Consumer confidence in the U.S. jumped by the most since 2005 this month

TO BE NOTED: From Bloomberg:

"U.S. Economy: Confidence Index Rises Most Since 2005 (Update2)

By Shobhana Chandra and Courtney Schlisserman

April 28 (Bloomberg) -- Consumer confidence in the U.S. jumped by the most since 2005 this month as stocks rallied, mortgage rates dropped and Americans anticipated more jobs would become available.

The Conference Board’s sentiment index rose more than forecast to a five-month high of 39.2. A separate report showed the decline in home prices in 20 U.S. cities slowed in February for the first time since 2007, with the S&P/Case-Shiller index posting an 18.6 percent drop from the same month a year before.

“There certainly is starting to be a shift here, where the data is either less bad or even starting to improve,” Michael Darda, chief economist at MKM Partners LP in New York, said in an interview with Bloomberg Television. While “we certainly haven’t turned the corner yet” the economy “could bottom out between June and October of this year and then start” growing.

Stocks trimmed losses and Treasuries slid after today’s reports signaled the grip of the recession is loosening. The gain in confidence raises the odds that recent gains in consumer spending, which accounts for 70 percent of the economy, will be sustained.

Today’s Conference Board report parallels figures from public-opinion polls that show for the first time in four years most Americans say they believe the U.S. is going in the right direction.

Right Track

An AP-GfK poll earlier this month found 48 percent said the nation is on the right track and 44 percent said the U.S. is headed in the wrong direction. President Barack Obama has an approval rating of 68 percent, a higher figure than his predecessor had at his 100-day mark in office, according to a New York Times/CBS News poll released this week.

The Standard & Poor’s 500 index fell 0.3 percent to close at 855.16 after dropping as much as 1.2 percent earlier. The yield on the 10-year Treasury note rose to 3.01 percent at 5:38 p.m. in New York from 2.91 percent late yesterday.

The 500 Index is poised for its first two-month advance in a year, with the rally led by industries most reliant on economic growth. Shares of banks and brokerages in the index added 70 percent since a March low, while a group of retailers, automakers and restaurant chains climbed 41 percent, industrial companies surged 40 percent and raw-materials producers increased 35 percent, according to data compiled by Bloomberg.

Amazon.com’s Gain

Amazon.com Inc., the world’s biggest Internet retailer, posted a jump in first-quarter sales and profits, bolstered by free shipping offers. Restaurant chains Cheesecake Factory Inc. and Yum! Brands Inc. reported quarterly income that fell less than analysts forecast.

Confidence was projected to rise to 29.7, from an originally reported 26 in March, according to the median estimate in a Bloomberg News survey of 62 economists.

The Conference Board’s measure of present conditions rose to 23.7 from 21.9 the prior month. The gauge of expectations for the next six months surged to 49.5, the highest level since the collapse of Lehman Brothers Holdings Inc. in September, from 30.2 last month.

The share of consumers who said more jobs will be available in the next six months gained to 13.9, the most since June 2007.

The outlook for current employment was more mixed. Fewer Americans said jobs were plentiful, at the same time those that said employment was hard to get also dropped.

‘Nearing a Bottom’

“Consumers believe the economy is nearing a bottom,” Lynn Franco, director of the Conference Board’s consumer research center, said in a statement. Still, the index “remains well below levels associated with strong economic growth.”

Today’s confidence figures corroborate other reports. The Reuters/University of Michigan preliminary index of consumer sentiment rose for a second month in April, advancing to the highest level since Lehman’s bankruptcy in September pushed the U.S. deeper into a slump.

Economists have said the Conference Board’s index tends to be more influenced by attitudes about the labor market.

The economy has lost 5.1 million jobs since the recession began in December 2007. Economists surveyed by Bloomberg in early April predicted unemployment will rise to 9.5 percent by the end of the year.

At the same time, recent reports show efforts by Federal Reserve policy makers, who are meeting today and tomorrow, to support housing and revive lending may be starting to work. Combined purchases of new and existing houses have hovered around a 5 million annual pace since November, and sales at retailers improved in the first two months of the year.

Richmond Index

Manufacturing in the region covered by the Richmond Fed contracted this month at the slowest pace since May 2008, the bank reported today.

The Libor-OIS premium that indicates banks’ reluctance to lend to each other fell to 0.84 percentage point today, the lowest level since before Lehman collapsed in September, according to data compiled by Bloomberg.

In a sign the plunge in car sales may be easing, AutoNation Inc., the largest publicly traded U.S. car retailer, this month reported a smaller-than-expected drop in first-quarter earnings.

“We saw in the first quarter the first signs of stabilization,” Chief Executive Officer Mike Jackson said in an interview on April 23. Sales improved in the last 10 days of March as banks offered better lending terms, he said.

The average rate on auto loans is 2.67 percentage points above one-month Libor. While that is more than the average of 1.84 percentage points over the past decade, it’s down from about 8 percent in December.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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