US Consumer Confidence Bounce back in March

Wednesday, March 31, 2010

U.S. consumer confidence rebounded in March after falling sharply in the prior month, the Conference Board said Tuesday. The consumer confidence index rose to 52.5 in March from 46.4 in February. Confidence had dropped significantly in February from 56.5 in January. The gain in confidence was greater than forecast, economists had predicted the index would increase to 51.0.

However Lynn Franco, director of the Conference Board's consumer research center was cautious about the pick-up, saying that consumers continue to express concern about current business and labor market conditions.

"Their outlook for the next six months is still rather pessimistic," Franco said. “Despite this month’s increase, consumers continue to express concern about current business and labor market conditions. Overall, consumer confidence levels have not changed significantly since last spring.”

The share of consumers who said jobs are plentiful advanced to 4.4% from 4%. The proportion of people who said jobs are hard to get decreased to 45.8, the fewest since August. More people also anticipated incomes and employment would improve in the next six months, the report showed.

Data also showed that home prices unexpectedly rose in February. Rising stock prices, a stabilizing housing market and fewer firings may be giving households hope that the recovery from the worst recession since the 1930s will be sustained. The 184,000 increase in payrolls economists project for this month shows it will take years for the economy to reverse the loss of 8.4 million jobs since the contraction began in December 2007.

Home prices in 20 U.S. cities rose 0.3% in January, indicating the housing market is stabilizing as the economy expands. The S&P/Case-Shiller home-price index climbed from the prior month on a seasonally adjusted basis after a similar gain in December.

Cheaper homes, low borrowing costs and government incentives have combined to support the housing market after its collapse helped trigger the recession. Fed officials this month signaled the U.S. recovery isn’t strong enough to stoke inflation, reduce unemployment quickly or justify an end to record-low interest rates.

While the economy has “continued to strengthen,” policy makers said in a statement after their March 16 meeting that “employers remain reluctant to add to payrolls.” Unemployment is projected to end the year at 9.5%.

The US Dollar rose against Sterling yesterday as the Pound slipped 0.64% to close the day's trading at GBP 1.5071. The US Dollar slid 0.38% against the Euro closing at EUR 1.3424.

Later today American ADP Non-Farm Payrolls are due for release. The figures always shake the markets but it is not always a good predictor of Non-Farm Payrolls which will be released on Friday. Last time the figure showed a loss of 20,000 jobs. This time an increase of 41,000 jobs is predicted.

Yesterday saw the Canadian Dollar rise for the second day against its US counterpart as gains in global equities and crude oil spurred demand for commodity currencies. It gained 0.20% against the US Dollar during trading to close at CAD 1.0192. The previous day it advanced 0.51% or 0.05 cents against the US Dollar to CAD 1.0214.

The currency has gained 3.6% against the US Dollar so far this year, the second best performer after the Mexican Peso among the 16 most traded currencies in the forex online market. It will be the fourth straight quarterly rise for the currency, which tends to rise and fall with commodity prices.

"The Canadian Dollar remains a market favorite and after a brief correction last week appears to be back on track for a move towards parity", said Steve Butler, director of foreign exchange trading in Toronto at Bank of Nova Scotia, Canada's third largest lender. The Canadian GDP monthly figures are due for release later today.

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