Consumer Confidence Unexpectedly Rebounds as Gas Prices Ease
Consumer confidence unexpectedly rebounded in April as gasoline prices started easing after the Biden administration released millions of gallons from the nation's strategic oil reserve.
An index from the University of Michigan rose to 65.7 from a final reading of 59.4 in March, according to a report on Thursday. Economists expected the index to fall to 59, according to a poll by Trading Economics, which would have been the lowest in more than a decade.
April’s gain in consumer confidence, the first sign of improvement since December, came as premium gas prices fell to a national average of $4.76 a gallon this week from $4.98 a month earlier, according to AAA. The measure of sentiment is important because about three-quarters of the U.S. economy is supported by consumer spending and people tend to refrain from making purchases if they are concerned about the future.
“A reprieve in gas prices was immediately recognized by consumers in today's preliminary report on April consumer sentiment,” Wells Fargo economists Tim Quinlan and Sara Cotsakis said in a report. “Consumers believe we may have gotten past the worst of the spike.”
The improvement in the labor market, with more than 6 million jobs added to the economy over the past year, caused expectations of future wage increases to rise to 5.3%, the highest in more than three decades, said Richard Curtin, the survey's chief economist. The U.S. unemployment rate reached a two-year low of 3.6% in March, according to government data.
"Consumers still anticipate that the national unemployment rate will inch downward, acting to improve consumers' outlook for the national economy," said Curtin.
A component of the index measuring Americans' assessment of the current economic conditions increased to 68.1 in April from 67.2 in March. It’s too soon to tell if the mood of consumers will continue to improve, Curtin said.
“The April survey offers only tentative evidence of small gains in sentiment, which is still too close to recession lows to be reassuring,” he said. “There are still significant sources of economic uncertainty that could easily reverse the April gains, including the impact on the domestic economy from Putin's war and the potential impact of new covid variants.”