Here is comes again the dreaded U word Unexpectedly. I think they should toss out the book, because only when things go up is it Expected. Down it is Unexpected. So do this people who call themselves economists have a clue? IMHO they do not. Queenbee
U.K. May Consumer Confidence Drops to Five-Month Low, GfK Says
By Svenja O’Donnell
May 28 (Bloomberg) -- U.K. consumer confidence unexpectedly dropped to a five-month low in May as Britons baulked at the prospect of government spending cuts and became more pessimistic about the economic outlook, GfK NOP said.
An index of sentiment fell to minus 18 from minus 16 in April, the market researcher said in an e-mailed statement today in London. Economists had forecast that the gauge would be unchanged, according to the median of 15 estimates in a Bloomberg News survey. A measure of optimism on the economy over the next 12 months fell 8 points to minus 9.
“With considerable cuts in public spending, plus higher taxes on the way, it is hard to see the confidence index improving significantly in the near future,” Nick Moon, a managing director at GfK, said in the statement. This is “clearly not good news for the coalition government, especially with mounting speculation about double-dip recession.”
Prime Minister David Cameron on May 25 pledged to speed up measures to reduce the budget deficit, a day after his government announced 6.2 billion ($9 billion) of spending cuts this year. The Conservatives, forced to form Britain’s first coalition since World War II after May 6 elections failed to produce a clear winner, must cut the record budget gap without hurting the economy’s recovery from the recession.
A gauge of consumers’ perception of their personal finances over the next 12 months fell 5 points to minus 3 this month, the lowest in more than a year. GfK’s index of consumers’ willingness to make major purchases, such as cars and electrical goods, fell 1 point to minus 21.
Britons’ assessment of the past has improved. A measure of the general economic situation over the previous 12 months rose 2 points to minus 45, while consumers’ view of their personal finances in the period rose 1 point to minus 13.
GfK surveyed 2,002 people from April 30 to May 16. The margin of error is estimated at 2 percentage points.
And if you thought the UK was unique here is the same story about the US. Beware the U word again. QB
Consumer Spending in U.S. Stalls, Savings Increase
By Timothy R. Homan
May 28 (Bloomberg) -- Consumer spending in the U.S. unexpectedly stalled in April as Americans used growing wages to rebuild savings.
Purchases didn’t increase for the first time since September and compared with a 0.3 percent increase projected by the median forecast of economists surveyed by Bloomberg News, Commerce Department figures showed today in Washington. Incomes climbed 0.4 percent for a second month, and the savings rate rose for the first time in four months.
Rising pay may help mitigate the damage from the financial turmoil caused by the European debt crisis, sustaining the economic recovery. Profits at retailers from Target Corp. to Gap Inc. are beating estimates, and hiring is picking up, giving American households the means to boost both spending and savings in coming months.
“The consumer is going along for the ride but isn’t really leading the recovery,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, who projected spending would pause. “Because employment is growing, we’re starting to create some labor income and that is positive for future consumer spending.”
Stock-index futures trimmed earlier gains after the report. The contract on the Standard & Poor’s 500 Index rose 0.1 percent to 1,102.5 at 8:53 a.m. in New York. Treasury securities rose, pushing the yield on the benchmark 10-year note down to 3.32 percent from 3.36 percent late yesterday.
Gain Projected
The median estimate was based on 77 economists surveyed. Projections ranged from a decline of 0.1 percent to a gain of 0.6 percent.
The median estimate of economists surveyed called for a 0.4 percent advance in incomes. Wages and salaries in April rose 0.4 percent after climbing 0.3 percent in March.
The pause in April purchases followed a 0.6 percent increase the prior month, indicating an early Easter holiday may have pushed sales into March at the expense of last month.
The savings rate climbed to 3.6 percent last month, the highest level since January, from 3.1 percent in March as incomes increased and purchases cooled.
Today’s report showed inflation was little changed. The inflation gauge tied to spending patterns increased 2 percent from April 2009, the same as in the 12 months ended in March.
The Fed’s preferred price measure, which excludes food and fuel, rose 0.1 percent in April and was up 1.2 percent from a year earlier.
Adjusted for inflation, spending was also unchanged, the first time without an increase since September.
Retailer Profits
Target, the second-largest U.S. discount retailer, this month said it posted first-quarter earnings that beat analysts’ projections. Chief Executive Officer Gregg Steinhafel cited a better-than-expected economic environment that boosted sales of profitable items such as clothes.
The economy grew at a 3 percent annual rate in the first quarter, after expanding at a 5.6 percent pace in the last three months of 2009, figures from the Commerce Department showed yesterday. Consumer spending accelerated to a 3.5 percent pace, from 1.6 percent in the fourth quarter of last year.
The labor market is likely to determine the pace of spending in coming months. Employers have increased payrolls in five of the past six months, culminating in a 290,000 gain in April that was the biggest gain in four years, according to figures from the Labor Department.
Employment probably increased again this month, and the unemployment rate likely fell to 9.8 percent, according to the median estimates of economists surveyed before a Labor Department report due June 4.