Consumer sentiment hits 14-month high, GDP comes in higher and Ford (F) announces new recall

Bourbon & Bayonets / Friday, September 26th, 2014

Markets were heading higher on Friday after consumer sentiment reached a 14-month high in September. The Thomson Reuters/University of Michigan’s final reading for consumer sentiment this month came in at 84.6, up from August’s reading of 82.5. This is a level that has not been reached since July 2013. Economists had been projecting a reading of 84.7 for the month. The survey director, Richard Curtin, said, “The main factor promoting greater confidence in September was more favorable prospects for the domestic economy as well as more favorable personal income expectations.” The reading for the month reveals that people are predicting an increase in consumer spending over the next year as well. The section of the reading that measures current economic conditions came in at 98.9; this was slightly below last month’s reading of 99.8.

In a separate report, gross domestic product grew during the second-quarter. The reading for the three months came in at 4.6%, which beat out the 4.2% expectation among economists. This blew past the first-quarter’s reading of a 2.1% decline. With the improving data, many analysts are wondering how much longer the Federal Reserve will leave interest rates near zero. Brittany Baumann, an economist with Credit Agricole CIB, said, “We definitely see momentum,” in the U.S. economy. “Consumer spending should benefit from strengthening labor conditions and improved financial conditions,” while business investment should also continue, she said.

Shares of Ford (F) were relatively flat after the company announced that they would be placing a recall of 850,000 vehicles. The problem is with the airbag system. There is a software glitch that could lead to a short circuit, causing a delay in the deployment of the airbag if the vehicle were to get into an accident. The vehicles being affected by the recall are Ford C-Max made between 2013 and 2014, Fusion, Escape and Lincoln MK.

That’s all for today,

Warren Gates, Normandy Research

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