In a tale of two outlooks, the confidence of Utah consumers faltered in April on worries about the impact of automatic federal budget cuts, while U.S. confidence in the economy jumped as the prospects for jobs improved.
Zions Bank on Tuesday said its Consumer Attitude Index fell to 76.5 in April from 78.9 in March, possibly on “ambiguity” surrounding the impact on Utah of the sequester, a set of $85 billion in automatic spending cuts. The index is at its lowest level this year.
Also Tuesday, the Conference Board, a New York-based research group, said its U.S. consumer confidence index rose to 68.1 last month. That’s up from a reading of 61.9 in March, bringing the index back to its February level.
Confidence in the economy is watched closely because consumer spending accounts for about 70 percent of U.S. economic activity.
Although Utahns’ confidence is greater than elsewhere in the U.S., the local index remains below the 90 reading that indicates a healthy economy. The Zions index, launched 27 months ago, has ranged from a low of 66.3 in June 2011 to a high of 87.1 last October. Despite several spikes, the U.S. index has remained below 90 since the Great Recession began in December 2007.
Fears about the sequestration have rattled Utahns. The Obama administration initially said that 11,500 civilians working at Hill Air Force Base would be forced to take 22 days off, beginning April 1, losing 8.5 percent of their yearly pay. The Department of Defense has since announced that furloughs will begin in June and that the number of furlough days will be reduced to 14.
A majority of Utahns surveyed by The Cicero Group for the Zions index said they were fed up with the federal government. Only 7 percent believe the executive and legislative branches are doing an adequate job to improve the economy, while 64 percent think the government is doing a poor job.
Utah consumers appear more pessimistic about the present than they are about the future six months from now, according to Zions. The bank’s “expectations” index, an estimate of confidence in the economy six months from now, fell just 0.8 points in April to 79.9. By contrast, the “present situation” component dropped 4.8 points to 71.6.
The uncertainty hasn’t infected the housing market along the Wasatch Front, where single-family home prices in the Salt Lake City area have increased every month year-over-year, since April 2012.
Confidence “is very high,” said Rob Corcoran, owner of Influence Real Estate, a luxury home brokerage in Cottonwood Heights. “We have a lot of [interest from] locals [who] because of interest rates are maybe looking to move up. At the same time, we have people moving into Utah. In a lot of places, we only have a one- to two-month inventory of homes for sale in the market.”
Nationally, the April gain in confidence was driven by greater expectations for growth in hiring and income over the next six months.
Confidence fell sharply in March, coinciding with a weak month of job creation. Employers added just 88,000 positions in March, down from the previous four months when job growth averaged 220,000 every 30 days.
But many economists say the slowdown was temporary and that hiring probably picked up this month. The Labor Department releases its April employment report Friday. Economists forecast that employers added 160,000 jobs.
Pay also is rising. A separate report from the Labor Department noted that wages and salaries rose 0.5 percent from January through March, up from the 0.3 percent gain in the previous quarter.
Higher income has helped offset an increase in Social Security taxes that took effect Jan. 1. The tax increase shrank take-home pay for a worker earning $50,000 a year by about $1,000. A household with two high-paid workers has up to $4,500 less.
More pay has led to greater spending. On Friday, the government said consumer spending rose from January through March at the fastest pace in more than two years.
In addition, gasoline generally has become cheaper. The national average price for a gallon of gas has fallen 29 cents since Feb. 27, to $3.50. In Utah, which earlier in the year enjoyed some of the lowest gas prices in the country, prices have leveled off, up 2 cents from a month ago but down 3 cents from a week ago, at an average of $3.48 a gallon. A decline in gas prices leaves consumers with more money to spend on other goods.
In Utah we trust, sort of
Although Utahns’ confidence in the economy is greater than elsewhere in the U.S., with a rating of 76.5, the local index remains below the 90 reading that indicates a healthy economy, ranging from a low of 66.3 in June 2011 to a high of 87.1 last October.