Consumer Confidence Slips in March

After rebounding from the effects of the partial government shutdown in February, consumer confidence unexpectedly dropped in March. This is the fourth time decline in the past five months.

The Consumer Confidence Index, reported by the Conference Board, fell by 5.6% from 131.4 to 124.1 in March, driven mainly by the sharp decline in the Present Situation Index, which fell more than the Expectation Situation Index in March. The Present Situation Index decreased 12.2 points from 172.8 to 160.6, the lowest reading in the past eleven months, while the Expectation Situation Index dropped 4.0 points from 103.8 to 99.8.

Both consumers’ assessment of current conditions and the short-term future weakened in March. In addition to business optimism cooling, less favorable labor market conditions, following slow job gains last month, has drawn more attention. The share of respondents reporting that jobs were “plentiful” decreased by 3.7 percentage points, while those saw jobs as “hard to get” increased by 2 percentage points. The gap between these two shares has narrowed.

The Conference Board suggested that the recent monthly fluctuations in the confidence index were impacted by the volatility in the financial market, partial government shutdown and weak job gains. Though consumers remained confident about ongoing economic expansion, the overall trend of the confidence index has softened, indicating the moderation of economic growth.

The Conference Board also reported the share of respondents planning to buy a home within six months. The share of respondents planning to buy a home increased to 6.1% in March. The share of respondents planning to buy a newly constructed home declined to 0.8%, while for those who planning to buy an existing home increased to 4.5%. Despite some monthly fluctuations, the trend for the share of respondents planning to buy a home within six months has increased since the early 2000s.

The Consumer Sentiment Index, published by University of Michigan, is another leading indicator that helps predict economic growth. The preliminary sentiment released earlier this month, however, contrasts with the Consumer Confidence Index. According to the report, improvement in sentiment in early March was seen for middle and lower income households. Despite the contrasting survey results, a similar pattern can be found in the March Consumer Confidence Index , in that lower-income households were the main driver of this month’s decline.

The chart below shows the Consumer Confidence Index by households’ income level — above $75,000 and below $75,000. The blue line represents the level of consumer confidence among households with income less than $75,000 and the red line represents the level of consumer confidence among households with income more than $75,000. This two levels of consumer confidence shown in the chart below are calculated by the average of the Consumer Confidence Index among different income groups[1], respectively.

In March, consumer confidence dropped 13.4 points among households with income less than $75,000, while it decreased 4.8 points for households with income above $75,000.

Note:

[1] Households’ income less than $75,000 includes those with income under $10,000, $15,000-24,999, $25,000-34,999, $35,000-49,999, and $50,000-74,999; households’ income more than $75,000 includes those with income $75,000-99,999, $100,000-124,999, and $125,000 and over. Income classification is based on the data released by the Conference Board.



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2 replies

  1. “The red line represents the level of consumer confidence among households with income less than $75,000 and the blue line represents the level of consumer confidence among households with income more than $75,000.”

    Um, actually, the red line is consumer confidence for households OVER $75K. And vice versa.

    You may want to fix that..

    Good article otherwise. (Y)

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