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GDP, Consumer Confidence & Consumer Sentiment

GDP

Consumer spending got a boost in the third estimate for fourth quarter GDP. It is now at 2.1 percent annualized growth vs. the second estimate of 1.9 percent. Consumer spending rose at a 3.5 percent pace in the quarter vs. economists’ predictions of 3.0 percent, the rate in the prior estimate.  The rise reflects upward revisions for service spending, now at 2.4 percent vs. an initial 1.8 percent, and nondurables, now at 3.3 vs. prior  estimates of 2.8 percent.  Spending on durables reflect the strong vehicle sales seen in the quarter, up an 11.4 percent rate for a one tenth decrease from the prior estimate. A negative in the report is a $3.4 billion upw2ard revision to inventory accumulation now at a level of $49.6 billion in the quarter. Though this adds to the GDP it is a reminder that heavy inventories may be slowing down first quarter output. Another negative is a $5.4 billion widening in the net export revision to a negative $605 billion, reflecting a sharp decrease for exports combined with higher imports. Nonresidential fixed investment downgraded to 0.9 percent from 1.3 percent with residential investment keeping steady at a strong 9.6 percent that ended two prior quarters of contraction. The government component is downgraded to 0.2 percent from 0.4 percent. The GDP price index is also revised, up one tenth from the prior estimate to a level of 2.1 percent with the core (core excludes food and energy) also up one3 tenth to 1.8 percent.

Consumer Confidence

March consumer confidence index was at a level of 125.6 making it the strongest reading since December of 2000. At 113.8, the expectations component hasn’t been this high since again 2000, in the month of September. The present situation component is at 143.1 for its best reading since August 2001. Subcomponents, watched closely for indications on the monthly employment report, are very positive. Fewer say jobs are hard to get this month at 19.5 vs 19.9 percent and many more are saying jobs are plentiful at 31.7 vs. February’s 26.9. A key reading on the expectations side is income whose results were also very positive. More see their income increasing over the next six months and fewer see their income declining. 21.5 vs 19.2 percent see their income rising where only 7.0 vs. 8.1 percent see their income declining. Buying plans are mixed autos are up but homes are down. A negative in the report is a two tenths decline in the 12 month inflation expectations only 4.6 percent, a very low reading for this component. Consumers are upbeat which doesn’t fit the lack of inflation expectations or the actual consumer spending which has failed to match the strength of consumer confidence.

Consumer Sentiment

The consumer sentiment index slowed, down 7 tenths lower in the final half of March to a level of 96.9 below economists’ predictions but still 6 tenths higher from February’s gain of 96.3. The current conditions component rose 1.7 points in the month to a level of 113.2, a positive indication for the March consumer spending. Expectations held unchanged at 86.5, the expectations component pivots on the outlook for jobs which appears to have had no change in the month. There was a noticeable decline in inflation expectations in this report, down 2 tenths for the one year outlook to a level of 2.5 percent and down 1 tenth to 2.4 percent for the five year outlook.

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