(Newswire.net — April 26, 2017) — US consumer confidence is on the rise, and that bodes well for the US economy. Over the past 3 months, US consumer confidence has consistently improved, besting expectations and raising prospects for stronger growth in 2017. In January this year, consumer confidence was reported at 98.5, followed by a drop to 96.3 in February. Since then, successive increases have taken place. The preliminary level for April 2017 is now 98. These figures indicate an upward revision of the consensus forecast figure of 96.5. Based on the statistics, Americans anticipate a 2.5% inflation rate in 2018 and a stabilization towards 2.4% by 2022. The data was compiled by the University of Michigan in its regular consumer sentiment report.
What is driving US consumer sentiment?
Consumer perceptions of the US economy remain favorable. This is precisely why we are seeing a better-than-expected level of 98 for April in the US consumer confidence index. The preliminary figure represents the second-best reading of 2017, and it had a positive effect on bourses when it came out. Reuters analysts were expecting the consumer confidence Index reading to drop in April, to figure of around 96.5. The preliminary figure for March was 97.6, and the actual figure came in at 96.9. The University of Michigan study polls 500 consumers on multiple topics including interest rates, unemployment, government policy and inflation. A graphic of US consumer sentiment shows positive movements since October 2016 when the reading was 87.2.
Performance of US bourses
A leading Lionexo trading analyst believes that it may have something to do with the CECI (Current Economic Conditions Index) being at record levels. This measure of US economic performance evaluates the state of the economy while the consumer confidence Index measures expectations. Interestingly enough, there was no divide between Republicans, Democrats and independents in the consumer sentiment index, but the expectations index has a significant divide. This goes to show that political sentiment is vital to how economic expectations play out. Turning our attention to the performance of Wall Street bourses for previous month, some surprising trends emerge:
- The New York Stock Exchange composite index is down 1.42%
- The NASDAQ composite index is down 0.12%
- The S&P 500 index is down 1.14%
- The Dow Jones Industrial Average is down 1.94%
Over the past 1 year however, all US indices are up – 8% on the low end and 19.13% on the high-end.
Commodities Prices Hampered by Crude Oil Weakness
Crude oil is one of the most important determinants of overall economic activity. When crude oil prices are weak, this tends to affect the economy by having a detrimental effect on inflation. Since crude oil is one of the most integral components of an economy, rising prices naturally give way to increased inflation. Currently the price of WTI crude oil on the Nymex is $50.42 and the price of Brent crude oil on the Ice is $52.95. The 52-week trading range of WTI crude oil is $44.33 on the low end and $57.50 on the high-end. Brent crude oil has far more latitude in its pricing. The 52-week below is $45.19 and the 52-week high is $59.89.
Brent crude oil started the year at $56.82 per barrel, and has traded in a tight range for most of 2017. The reason oil prices are coming into play once again is the upcoming meeting between OPEC and other oil-producing countries in May 2017. If no agreement can be reached on curbing production, prices will drop. Back in December 2016, Russia and OPEC countries agreed to cap production by 1.8 million barrels per day to increase the oil price in to the $50 – $60 range. Consumer sentiment will remain positive if OPEC and non-OPEC members can agree to another six-month production cap.