Consumer Confidence Drops in March, But Remains Elevated

The Conference Board’s Consumer Confidence Index declined in March, after increasing in February. The March decline in the Consumer Confidence Index reflects the declines in both the Present Situation Index and the Expectations Index. The Present Situation Index decreased by 0.8% from 161.2 to 159.9, while the Expectations Index declined by 2.7% from 109.2 to 106.2 in March. As a result, the Consumer Confidence Index decreased by 1.8% to 127.7 in March on a seasonally adjusted basis, after reaching an 18-year high in February.

While both sub-indexes fell over the month, the Expectations Index fell more. The Expectations Index, as one of the components of the Consumer Confidence Index, is based on responses to three questions in the survey, including respondents’ expectations regarding business conditions, employment conditions and their total family income in the coming six months. The weakness in the Expectations Index largely reflected the weakness in expectations of business conditions and employment. Meanwhile, the decline in the percentage of respondents expecting an increase in income was largely offset by a decline in the portion expecting their income to fall.

As shown in Figure 2, the contribution of “good outcome” in the red bar shows the change in the share of respondents expecting “better business”, “more jobs” or “increase in income” from February to March; the contribution of “bad outcome” in the green bar shows the change in the share of respondents expecting “worse business”, “fewer jobs” or “decrease in income” over the last month. For business and employment conditions, there were a large decline in the share of respondents expecting “good outcome” and a small increase in the share of respondents expecting “bad outcome”. The share of respondents expecting more jobs dropped by 3.3 percentage points as the share of respondents expecting less jobs rose by 0.2 percentage points. Similarly, the share of respondents expecting business conditions to improve declined by 2.0 percentage points and the portion expecting worsening business conditions rose by 0.4 percentage points. Meanwhile, the share of respondents expecting their total family income to increase in the next six months fell by 1.5 percentage points and the portion expecting their total family income to decrease in the next six months fell by 1.4 percentage points.

Over the month of March, expectations for employment conditions worsened by 3.5% on net, expectations for business conditions worsened by 2.4% on net, and expectations for total family income worsened by 0.1% on net. The net calculation tracks the difference between expectations of improvement (“better”, “more jobs” or “increase”) and expectations of worsening (“worse”, “fewer jobs” or “decrease”) across the months (shown in Figure 2).

The Conference Board also reported the share of respondents planning to buy a home within six months. In March, there were 5.5% of respondents planning to buy a home within six months, down from the 6.4% in February. The decline in the share of respondents planning to buy a home within six months reflects the declines in both the share of respondents planning to buy a new home and the share of respondents who were “uncertain” whether they would buy a new home or an existing home within six months.

The share of respondents planning to buy a new home within six months fell to the level of 0.6% in March, last seen in April 2015. After reaching 1.6% in December 2017, the share of respondents planning to buy a new home within six months declined for three consecutive months in January (1.2%), February (1.0%), and March (0.6%). Since the recent recession, whenever plans to buy a new home reached 1.6% or 1.7%, there would be similar drops in the following months and plans to buy a new home never surpassed 1.7% in the past ten years. However, as shown in Figure 3 above, despite the monthly volatility, the underlying trend in the share of respondents planning to buy a new home within six months has been moving upward since 2012.



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