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The University of Michigan's final reading for April consumer sentiment decreased to 93.0 from the preliminary level of 94.4 and March's reading of 95.7. The decline was larger than expected and was due to a moderation in both major components, with current conditions falling to 99.2 from the preliminary reading of 100.9 and 100.4 in March, while expectations slipped to 89.1 from a preliminary 90.2 and the March level of 92.7.
Overall, ongoing tensions in the Middle East, the rise in gas prices, the recent pullback in equities on uninspiring earnings, and some renewed concerns regarding the economy all appear to have weighed on sentiment again on the period. Note, however, that even with the April decline, the overall reading of sentiment still remains well above the September trough of 81.8 and the 91.5 reading of August.
Going forward, developments in the labor market and equities will continue to drive the levels of sentiment, which should correlate well with trends in consumer spending. Currently, consumer spending is expected to remain healthy over the next two quarters, rising 2.5% to 3.0%.
First Quarter GDP Jumps
The 5.8% surge in first quarter gross domestic product was almost exactly as expected, and the mix of components was also reasonably close to expectations.
Consumption rose at a 3.5% rate in the first quarter, which was only slightly bigger than expected. Residential construction rose at a 15.7% rate, while commercial construction fell at an expected 19.9% rate. These "as expected" figures limited the shock value of the report, though the remaining numbers revealed a few surprises.
Government spending rose at a 7.9% rate, which was stronger than expected due to a 19.6% surge in defense spending. Net exports was also stronger than expected, with a solid 6.8% growth rate for exports alongside a smaller than expected 15.5% surge in imports. And business inventories were weaker than expected, though this component still added 3.1 percentage points to first quarter growth.
Surprising weakness was seen in the important equipment and software component, which fell 0.5%, and this prevented the other surprises from pushing GDP well north of 6%. However, there are still two more rounds of revisions for the first quarter number, and the risks still lie to the high side.
From Standard & Poor's Global Markets
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