Permanent Value

Week in Review 05/20/13

Bruce Doole
May 21st, 2013

MAY CONSUMER SENTIMENT INCREASES

Although growth is estimated to slow in the second quarter of this year, improvements in the labor market and retail sales foreshadow continuing recovery. “We’re still definitely on the recovery path. We expect that this is going to be a very long and gradual recovery,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida. “Most economists are looking for stronger growth in the second half of the year and into next year.”

Consumer sentiment rose from 76.4 to 83.7 in April, its highest level since July 2007, exceeding economist’s expectations. In addition, Americans reported a favorable view of their personal finances, especially households in the upper third income levels. Upper income households reported having less debt and higher asset values, but did not estimate a higher income within the next year.

Households with investments are reaping the benefits of the stock market rally, which caused the market to reach record highs this year. Following the expiration of the payroll tax holiday, consumers are finding the rise in stocks offsets the additional tax. “For (upper income) people, the payroll tax and gasoline prices didn’t really matter much, but stock prices and home prices rising, that’s a big, big plus,” said Brown.

Currently, economic conditions are improving, consumer expectations are positive, and buying attitudes are optimistic. A report from Conference Board showed its Leading Economic Index increased 0.6 percent to 95.0 last month, the highest level since June 2008. “Changes in confidence don’t always filter through into changes in spending, but the omens are good,” said Amna Asaf, economist at Capital Economics.
Source: Yahoo Finance