Consumer Sentiment Stabilized In Late April, 1Q GDP Comes In Below Expectations

“Consumer confidence was not negatively affected by the Boston Marathon bombing,” said Thomson Reuters/University of Michigan Surveys of Consumers’ Chief Economist Richard Curtin, in releasing final statistics on consumer indicators for April last week. “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.”

The UM Consumer Sentiment Index rebounded from the mid-April reading of 72.3 to finish the month at 76.4, still down a couple points from the March final of 78.6. The index stands at exactly the same level as it did one year ago April.

Much of the strength in confidence remains centered in wealthier households that are benefiting from the rebound in housing prices and a run-up in the equity markets. On the other hand, consumers are still pessimistic about the economy’s longer-term prospects. Only one in four expect the unemployment rate to decline this year. In contrast to the Sentiment Index, the research group’s Expectations Index fell to 67.8 in April, down three points, and stands 6.2% below the year-earlier level. The Current Situation Index is 8.4% higher than a year ago.

The Conference Board’s Consumer Confidence Index, also released April 26, showed the fall in confidence earlier in April. The group’s Consumer Confidence Index fell more than eight points to 59.7 and the Expectations Index was off even more to 60.9 from 72.4 in March. Conference Board consumer data tends to be more volatile than the UM indices. The survey also closes earlier, this month on April 14.

Meanwhile, the Commerce Department said the advance estimate for real growth of gross domestic product in the U.S. rose 2.5% in the first quarter of 2013, up from last year’s fourth quarter final of 0.4%. The number disappointed many economists, who had expected a bigger jump following the weakness late last year.  Blue Chip Economic Indicators consensus forecast had predicted a 2.9% gain while economists polled by Reuters forecast a 3% increase. One bright note was a higher-than-forecast increase in real personal consumption expenditures, which rose 3.2% in the quarter compared to the Blue Chip forecast of  2.7%. Unfortunately, most of that gain was for spending on durable goods, up 8.1% in the quarter, and services. Spending for nondurables, including foodservice, rose only 1%.