United States: Consumer confidence hits almost three-year low in March as households worry about growing pandemic
March 31, 2020
The Conference Board’s consumer confidence index fell to 120.0 in March from February’s revised six-month high of 132.6 (previously reported: 130.7) but was better than market expectations of a sharper fall to 110.0. March’s print represented the weakest level of confidence among consumers since July 2017; however, the index remained markedly above the 100-threshold that separates optimism from pessimism.
The downturn in sentiment in March was the result of households’ declining optimism in the short-term outlook, with the sub index hitting an over-three year low. Consumers’ assessment of business conditions in the next six months deteriorated notably, while their view of the labor market outlook and their short-term income prospects were also less optimistic. Consequently, consumers are less willing to make major purchases in the near future.
On the other hand, consumers were still relatively upbeat about the present situation. The percentage of consumers claiming business conditions are “bad” increased in March, but the percentage of those stating conditions are good was unchanged. Meanwhile, households’ optimism of current labor market conditions receded somewhat, with the labor differential—the difference between the percentage of respondents who state that jobs are plentiful and those who say that jobs are hard to get—moderating to 31.0 in March from 32.6 in February.
Detailed data showed consumer confidence among households in the lowest income bracket suffered a much larger hit than the broad index in March, as the economic toll of the virus disproportionately impacts consumers employed in certain sectors, such as food and beverage, hospitality, and retail.
March’s decline is likely just the beginning, as the pandemic has intensified in the U.S. in recent weeks and more states are implementing stricter social distancing protocols, causing the marked spike in jobless claims in mid- and late- March. Commenting on the implications of this month’s reading, Lynn Franco, senior director of economic indicators at The Conference Board, noted:
“The intensification of COVID-19 and extreme volatility in the financial markets have increased uncertainty about the outlook for the economy and jobs. March’s decline in confidence is more in line with a severe contraction – rather than a temporary shock – and further declines are sure to follow.”
Author: Lindsey Ice, Economist