ICS Magazine

Consumer Sentiment Shows Surprise Jump

May 16, 2003
NEW YORK (Reuters) - U.S. consumer confidence rose more sharply than expected in early May, as Americans looked ahead to better economic times, market sources said on Friday.

A survey by the University of Michigan rose to 93.2 from April's 86.0, faring better than a forecast range of 82.0 to a high of 92.3, the sources said.

The survey's component index on consumers' current view on the economy fell to 94.1 in early May from April's 96.4, but the index of consumers' future expectations jumped sharply to 92.7 from April's 79.3, the sources said.

Consumer confidence is seen as a predictor of consumer spending, which drives two-thirds of the U.S. economy.

The data were an antidote for financial markets, shaken this week by growing concerns over deflation and disappointing weekly retail sales figures, economists said.

"A positive surprise for a change. The overall tone of the data this week has been disappointing," said Doug Porter, senior economist at BMO Nesbitt Burns in Toronto.

The University of Michigan survey ran counter to the most recent insights on consumer confidence, which have shown sentiment reversing course and declining again as domestic economic concerns return to the fore.

Market reactions to the University of Michigan survey were muted, although U.S. Treasuries curbed early gains on the data. Markets had focused on April consumer prices, which fell 0.3 percent according to figures released earlier on Friday.

"The inflation news is still dominating people's interest, and there's nothing in the Michigan numbers to change that focus," said Steve Ricchicuto, chief U.S. economist at ABN AMRO Inc. in New York.