Economic Round Up -- Consumer Spending Slows, Sentiment At 28-Year Low, Friday, May 30, 2008 12:38:46 PM
Friday was a hectic day on the economic front, featuring key reports from both sides of the Atlantic, including a pair of readings on the health of the US consumer.Before the opening bell, the Department of Commerce released its closely watched report on personal income and spending in the month of April, showing modest increases in both income and spending that came in line with economists` expectations.
The report showed that personal income edged up 0.2 percent in April following a revised 0.4 percent increase in March. Economists had expected income to increase by 0.2 percent compared to the 0.3 percent increase originally reported for the previous month. Economist pointed out that some of the spending increases came as consumers cashed stimulus checks from the government.
The consumer remained in focus with the release of data showing US consumer sentiment in the month of May was unexpectedly revised upwards from a previous reading, according to a report released by Reuters and the University of Michigan. Still, optimism was tempered as analysts pointed out the consumer sentiment index was still at a 28-year low.
The report showed that the Reuters/University of Michigan consumer sentiment index for May was revised up to 59.8 from the previously reported reading of 59.5. The upward revision came as a surprise to economists, who had expected the index to be unrevised.
In a prelude to Monday`s ISM Manufacturing data, the Chicago PMI came in better-than-expected at 49.1 in May from a reading of 48.3 in April, beating expectations that it would rise only to 48.5. The gauge of mid-western manufacturing stayed below growth levels for the fourth consecutive month, but has crept closer to the 50-level for the last three months.
Friday`s news from the Eurozone did little to provide hints about the direction of the next European Central Bank rate decision. The ECB next meets in June, and analysts are divided as to whether the central bank will cut interest rates in the face of a slowing economy.
Official data revealed German retail sales slipped last month, suggesting that economic weakness was is taking hold in Europe. However, higher than expected inflation numbers and hawkish rhetoric from an ECB official fueled speculation that policy makers may stand pat on interest rates for at least another month.
The Federal Statistics Office reported that German retail sales fell 1.7% in April month-over-month. Economists had expected a 0.6% rise following the previous month`s 2.2% decline.
Meanwhile, Euro zone annual inflation grew 3.6% in May, according to preliminary estimates from Eurostat. Economists had expected a reading of 3.5%, up from April`s 3.3% growth rate.
ECB council member Axel Weber ramped up his inflation-fighting rhetoric, saying that changing the ECB`s definition of price stability would risk the bank`s credibility at a time when fighting inflation is of the essence.
posted by Kalin Tasev @ 11:12 AM
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