The U.S. Consumer Shows Renewed Enthusiasm in April

- Consumers in America more upbeat in April especially over short-term horizon

- Consumer Confidence metric rises to 128.7 from 127.0 instead of falling to 126.0 as experts had forecast  

- Data suggests rebound in general economic outlook for Q2 after dismal Q1

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The primary U.S. consumer confidence gauge bounced back in April after a poor March reading.

U.S. consumers displayed surprisingly more confidence in April mainly on the back of a rebound in short-term optimism, data suggests.

The results easily beat analysts' forecasts which had been for a further decline according to data released from the New York-based Conference Board, on Tuesday.

The headline confidence index rose to 128.7 in April from 127.0 in March, easily beating - indeed completely wrong-footing - expectations of a decline to 126.0.

“Consumer confidence increased moderately in April after a decline in March,” says Lynn Franco, director of economic indicators at The Conference Board.

“Consumers’ assessment of current conditions improved somewhat, with consumers rating both business and labor market conditions quite favorably," she adds.

Economists and market commentators were generally upbeat about the data.

"The main disappointment in last month's confidence report was the weakness in intentions to make major purchases, but all of those rebounded this month and actually more than corrected for the previous decline," says Andrew Grantham, an economist at CIBC economics.

He adds that although the stronger-than-expected data probably won't be enough to alter expectations that GDP growth decelerating in Q1 it may indicate a stronger path of economic growth in Q2.

The Dollar was little changed following the release despite the supportive numbers, GBP/USD remained below the 1.4000 key watermark, trading at 1.3962, whilst EUR/USD traded at 1.2220. 

Earlier in the day the Dollar had risen as a result of 10-year US Treasury Bond Yields poking above 3.0% for the first time in years.  

Bond yields are a measure of compensation for bondholders due to inflation expectations - higher inflation is a sign of accelerating growth and an overheating economy, and equals higher yields. 

A stronger economy and higher inflation are likely to lead the Federal Reserve to raise interest rates more rapidly, and higher interest rates are one of the main factors which appreciate currencies because they act as a magnet to foreign capital, drawn by the promise of higher returns.

"The dollar is also finding a supporting cast in solid U.S. data that has the Fed on track to raise rates as many as four times this year and markets girding for cautious guidance from the ECB this week," says Joe Manimbo market analyst at Western Union.

"Dollar sentiment today will in the hands of bond markets which should take their cues from U.S. numbers on consumer confidence and new home sales," he added.


Consumer Detail

Other data released at the same time as the main index included the consumer confidence 'present situation' index, which rose to 159.6 from 158.1 previously.

The forward-looking 'consumer expectations' index increased to 108.1 in April from 106.2 in the previous month.

The percent of consumers expecting their incomes to decline over the coming months reached its lowest level since December 2000: 6.0%, according to the accompanying report.

"Overall, confidence levels remain strong and suggest that the economy will continue expanding at a solid pace in the months ahead," says Franco.

The detail of the report showed that the percentage of respondents saying business conditions were “good” decreased from 37.6% to 35.2%, however, those claiming business conditions are “bad” decreased, from 13.3% to 11.3%.

The data on jobs was mixed: the percentage of consumers claiming jobs are “plentiful” declined from 39.5% to 38.1% while those claiming jobs are “hard to get” also declined, from 15.7% to 15.2%.

The percentage of consumers anticipating business conditions will improve over the next six months increased from while those expecting business conditions will worsen decreased.

Consumers’ outlook for the labor market was also more positive. The proportion expecting more jobs in the months ahead increased while those anticipating fewer jobs remained unchanged at a rather low 12.5%.

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