Consumer confidence unexpectedly fell in May by the most in more than two years as Americans’ views on the economy dimmed. The University of Michigan preliminary index of sentiment dropped to 88.6, the lowest since October, from 95.9 in April. The 7.3 point decrease was the largest since December 2012.
News that the world’s largest economy stalled last quarter shook Americans’ outlook, while the tick up in fuel costs since early March also contributed to the gloomier perceptions. While slightly lower than in the prior month, households still held relatively upbeat views on incomes, a sign spending will be sustained.
The index has shown bigger declines than in May in only 20 months since the monthly surveys began in 1978. Another report showed factory production stalled in April as American manufacturers were dealt blows by a strong dollar and cheap oil. The unchanged reading in output followed a 0.3 percent March gain, according to data from the Federal Reserve. Total industrial production declined for a fifth consecutive month as mining companies and utilities cut back.
The labour market continues to underpin consumer spending. Payrolls climbed by 223,000 in April following a 85,000 gain, and the jobless rate fell to 5.4 percent, the lowest since May 2008, according to Labour Department data released last week. Wage gains, though, remain tepid. Hourly pay was up 2.2 percent in April from a year earlier, holding within the narrow range tracked over the past four years.
The Michigan sentiment report shows a bigger retreat in confidence this month than other measures. The Consumer Comfort Index fell to 43.5 in the period ended May 10, the lowest level since early March. Recent reports indicate consumers remain reluctant to open their wallets. Sales at retailers barely budged in April after a 0.2 percent drop from January through March that marked the first quarterly decline in almost three years.
The UK economy could be in better shape than estimated at the start of 2015 after construction output increased by 3.9 per cent month-on-month in March.
The sector had fallen in January and February, and private sector house-building rose for the first time in six months in March, with constructions up 1.3 per cent, figures from the Office for National Statistics reveal.
The data encourage hopes that the weak economic start in 2015 was not as bad as predicted and that first quarter forecasts could be revised up.
The ONS said that combined with an upward revision to first quarter industrial output data released on Tuesday, today's figures could push up April's 0.3 per cent GDP growth estimate by just under 0.06 percentage points.
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