Consumer confidence was down in April, according to the University of Michigan and Thomson Reuters. The Consumer Sentiment Survey’s overall index fell from 78.6 in March to 72.3 in April. This reverses three consecutive months of increases in sentiment, with the overall mood remaining subpar. The index has stayed below 80 since November, when it stood at 82.7.
Perceptions about the current and future economic environment were both lower. The index of current conditions dropped from 90.7 to 84.8; meanwhile, the forward-looking component decreased from 70.8 to 64.2. It is difficult to single out one specific item that might have led to this month’s decline. The Conference Board’s March figure on consumer confidence specifically suggested the impact of across-the-board federal budget cuts (or “sequestration”). Another aspect could be higher payroll taxes, but the index rose in the first three months after these went up. With that said, perhaps the effects of increased taxes have had a cumulative effect, as retail sales numbers were also disappointing this morning.
To the extent that sentiment moves with pocketbook issues, two things are probably off the table as explanatory factors in the lower confidence data. First, equity markets are reaching all-time highs, which should make Americans feel a little wealthier. The Dow Jones Industrial Average has risen 13.4 percent so far in 2013, a healthy return to say the least for just a little over three months.
Second, gasoline prices have edged somewhat lower in the past month, as noted in this morning’s producer price index data. Consumers responding to the University of Michigan’s survey appear to have taken that to heart. Inflationary expectations have decreased from 3.2 percent over the course of the next year as noted in the March survey to 3.0 percent in April.
Chad Moutray is chief economist, National Association of Manufacturers.