Economy Watch: Consumers Cheer Up; CBO: ACA Not as Costly as Predicted

By Dees Stribling, Contributing Editor

Just in time for spring – or maybe partly because of spring, since winter was so hard so many places – U.S. consumer sentiment is up, with the mid-April reading coming in at 82.6, according to the Reuters/University of Michigan’s consumer sentiment index. That’s the highest the index has been in about nine months. At the end of March, the reading was 80.0, which was only a very slight improvement from mid-March, when it was 79.9.

Both components of the index are up. Expectations came in at 73.3, compared with a final March reading of 70.0, so consumers are a little more cheerful in their outlook. The current conditions component rose to 97.1, compared with 95.7 at the end of March. Consumers seem to be feeling better about job prospects and rising incomes, though perhaps not the housing market.

Consumers aren’t fretting about higher prices, despite recent rises in the price of gas (gas has been yo-yoing a lot in recent years, after all). According to the University of Michigan, one-year inflation expectations are down 0.1 percentage points to 3.1 percent, which – considering the persistent lower-than-2 percent inflation in recent quarters – seems like an overestimate. The university’s Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy, and sentiment generally is a reflection of strength of consumer spending, which is at the heart of the U.S. economy.

CBO Says ACA Not Quite as Costly as Previously Thought 

Last week, the nonpartisan Congressional Budget Office released an updated projection on the cost of the Affordable Care Act (ACA) to the federal government. The CBO now predicts that the law’s coverage provisions will cost the government about $1.3 trillion over the next 10 years. Earlier this year, the office predicted a cost of $1.4 trillion over the same period.

The main reason for the downward adjustment is that on balance, health insurance premiums, especially those sold over the exchanges, aren’t quite as high as expected. That means that federal subsidies for people buying such insurance also aren’t quite as high as expected, which is one of the major costs of the law (the other being the expansion of Medicaid).

The CBO isn’t expecting large spikes in premiums next year, though that’s certainly still in the realm of possibility. Should premiums start to go up again rapidly, then the cost of the law will too.

Wall Street had a down day on Friday, with the Dow Jones Industrial Average losing 140.19 points, or 0.68 percent. The S&P 500 was off 0.68 percent, while the Nasdaq declined 1.46 percent.