United States: Consumer confidence pulls back in March
Consumer sentiment moderated in March but remained particularly upbeat, supported by tight labor conditions and a strengthening economy. The Conference Board’s monthly consumer confidence index eased to 127.7 in March from a downwardly revised 130.0 in February (previously reported: 130.8), contrasting market analysts who had expected the index to edge higher to 131.0 in March. Despite the sequential decline, the index remains comfortably above the 100-point threshold that separates consumer optimism from pessimism.
The softer headline figure reflected a slight moderation in consumers’ assessment of present economic conditions, with the number of survey respondents claiming business conditions have deteriorated increasing more than those saying economic conditions have improved. Similarly, their expectations over the next six months were less upbeat in March compared with February, with less respondents anticipating an improvement in business conditions and more expecting a deterioration. Consumer spending plans also softened somewhat in March, with declines in the share of respondents planning to purchase major appliances, homes and autos. Similarly, their expectations for the stock market continued to moderate in March after peaking in January.
The report’s silver lining was a slightly more positive assessment of the labor market. 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—widened for a third consecutive month in March, up to 25.0 in March from the revised 24.0 figure recorded in February. However, consumers were not as optimistic regarding labor opportunities in the next six months, with the proportion expecting more jobs in the months ahead moderating considerably in March. Consumers’ income prospects were also less positive in March, albeit only marginally.
Although March’s pull-back from an 18-year high was for the most part unexpected, the sequential moderation is well aligned with other consumption-related indicators that point to a moderation in household spending in the first quarter of the year. Nonetheless, consumer confidence readings remain exceedingly positive and should boost households’ discretionary spending through the year, an effect that will be compounded by healthy employment growth and modest tax cuts.