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Analysts have taken note of the turbulent economic activity in the first quarter, punctuated by a recent report from Fannie Mae forecasting only one rate hike by the Federal Reserve this year instead of two.
Freddie Mac’s most recent economic outlook also indicated painted a somewhat murkier picture for the economy, though the report also stated that the slow Q1 economic activity should not affect the housing market this year.
Now consumers are noticing the recent economic volatility. The Conference Board’s Consumer Confidence Index for April dropped from 96.1 down to 94.2 in April (1985=100) following an increase in March that nearly erased a dismal February.
According to the Conference Board, the Present Situation Index increased from 114.9 to 116.4 from March to April and the Expectations Index dropped from 83.6 to 79.3 during the same period. And while consumers’ appraisals of current conditions improved slightly in April, consumers surveyed had a generally less optimistic short-term outlook and had less favorable attitudes toward the labor market—there was an increase in the number of consumers who said they anticipate fewer jobs, while there was a decrease in the number of consumers who said they anticipate more jobs.
“Consumer confidence continued on its sideways path, posting a slight decline in April, following a modest gain in March,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions improved, suggesting no slowing in economic growth. However, their expectations regarding the short-term have moderated, suggesting they do not foresee any pickup in momentum.”
“The fourth consecutive increase in the labor force participation rate amid solid job growth has slowed the decline in the unemployment rate, and, combined with anemic productivity growth, may help explain the failure of wages to accelerate more rapidly.”
Doug Duncan, Fannie Mae Chief Economist
The pessimism toward the labor market came despite a healthy monthly average of job gains of more than 220,000 in the first quarter. Fannie Mae Chief Economist Doug Duncan predicted that economic activity will pick up for the remainder of the year even after the slow Q1.
“We expect a healthy labor market, the solid hiring trend seen during the last few months, and stronger household incomes to boost consumer spending over the rest of the year despite weak economic activity in the first quarter,” Duncan said. “The fourth consecutive increase in the labor force participation rate amid solid job growth has slowed the decline in the unemployment rate, and, combined with anemic productivity growth, may help explain the failure of wages to accelerate more rapidly.”
The decline in consumer confidence, particularly the drop in expectations for better business conditions and more jobs for the next six months seems to have had an adverse effect on near-term plans for homebuying. According to the Conference Board, the percentage of consumers surveyed who said they plan to buy a home in the next six months dropped from 6.3 percent in March down to 5.4 percent in April.
The “advance” estimate for first quarter GDP will be released by the Bureau of Economic Analysis on Thursday, April 28. The April employment situation will be released by the Bureau of Labor Statistics on Friday, May 6.
