Tag Archives: Consumers

U.S households see spending up, job prospects improving: New York Fed survey

- A shopper walks down an aisle in a Walmart Neighborhood Market in Chicago

WASHINGTON (Reuters) – Consumers expect to boost spending in the months ahead and voiced confidence they are more likely to find a job and less likely to lose one in a strong labor market, the New York Federal Reserve reported Monday in its latest monthly survey of consumer expectations.

Nearly 35 percent of the 1,300 heads of household included in the June poll said they were better off economically than a year go, a record in the four years the survey has been conducted.

The results bolster the current Fed outlook of an economy that continues to generate jobs despite tepid overall growth and some concern about a recent dip in inflation, improving chances the central bank can follow through with plans for a further interest rate increase later this year.

Though household expectations of inflation for the year ahead did dip slightly from the May survey, to 2.5 percent from 2.6 percent, respondents expect strong price increases of 2.8 percent over the coming three years. That’s consistent with the Fed’s current outlook that the recent weakness in inflation will prove temporary.

The survey also bolstered the view of continued strong consumption growth. Half of those polled said they expected to spend at least 3.3 percent more in the coming year, compared to median expected spending growth of 2.6 percent in the May survey. One-year-ahead expected earnings growth increased to 2.5 percent in the June survey from 2.2 percent in May.

Respondents also showed broad faith in the strength of the labor market, with a slight dip to 13.5 percent from 13.6 percent in the perceived probability of losing a job in the next year, and a jump to 59.2 percent from 56.7 percent in the probability of finding employment.

More than a fifth of respondents said they might leave a job voluntarily in the next year, up from 19.4 percent in May. Voluntarily job exits are considered a sign of a strong labor market that offers employees choices.

The online poll is designed to be a representative sample of the U.S. population. The New York Fed did not provide the margin of error for the poll.

 

(Reporting by Howard Schneider; Editing by Andrea Ricci)

 

Frugal U.S. consumers seen holding back first-quarter GDP

People shop at The Grove mall in Los Angeles November 26, 2013. REUTERS/Lucy Nicholson

By Lucia Mutikani

WASHINGTON (Reuters) – The U.S. economy likely hit a soft patch in the first quarter as an unseasonably warm winter and rising inflation weighed on consumer spending, in a potential setback to President Donald Trump’s promise to boost growth.

Reduced business investment in inventories and government spending cuts also crimped gross domestic product growth. A Reuters survey of economists conducted last week forecast GDP rising at a 1.2 percent annual rate, but many economists lowered their estimates after the government on Thursday released advance reports on the goods trade deficit and inventories in March.

The Atlanta Federal Reserve is forecasting the economy growing at only a 0.2 percent rate in the first quarter, which would be the weakest performance in three years.

The economy grew at a 2.1 percent pace in the fourth quarter. The government will publish its advance first-quarter GDP estimate on Friday at 8:30 a.m. The expected sluggish first-quarter growth pace, however, is not a true picture of the economy’s health.

The labor market is near full employment and consumer confidence is near multi-year highs, suggesting that the mostly weather-induced slowdown in consumer spending is probably temporary. First-quarter GDP tends to underperform because of difficulties with the calculation of data that the government has acknowledged and is working to rectify.

“The weakness is not a reflection of the underlying health of the economy, part of it is residual seasonality,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “It has become more understood over the past few years, that’s why people often discount first-quarter GDP.”

Even without the seasonal quirk and temporary restraints, economists say it would be difficult for Trump to fulfill his pledge to raise annual GDP growth to 4 percent, without increases in productivity.

Trump is targeting infrastructure spending, tax cuts and deregulation to achieve his goal of faster economic growth.

On Wednesday, the Trump administration proposed a tax plan that includes cutting the corporate income tax rate to 15 percent from 35 percent, but offered no details.

ANEMIC CONSUMER SPENDING

Economists estimate that growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, braked to below a 1.0 percent rate in the first quarter. That would be the slowest pace in nearly four years and follows the fourth quarter’s robust 3.5 percent growth rate.

The expected weakness in consumer spending is blamed on a mild winter, which undermined demand for heating and utilities production. Higher inflation, which saw the consumer price index averaging 2.5 percent in the first quarter, also hurt spending.

Government delays issuing income tax refunds to combat fraud also weighed on consumer spending. Economists said Federal Reserve officials were likely to view both the anemic consumer spending and GDP growth as temporary when they meet next week. The Fed is not expected to raise interest rates.

“The good news is that the Fed in recent years has distanced itself from the GDP numbers,” said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey. “A weak first-quarter GDP print should not affect the policy debate.”

After contributing to GDP growth for two straight quarters, inventory investment was likely a drag in the first quarter. JPMorgan is forecasting inventories chopping off one percentage point from GDP growth. Trade was likely neutral after being a huge drag in the fourth quarter.

But some good news is expected. Business investment likely rose further, with spending on equipment seen accelerating thanks to rising gas and oil well drilling as oil prices continue their recovery from multi-year lows.

Investment in home building is also expected to have gained momentum in the first quarter.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)