After a modest increase in February, consumer confidence surged to the highest level in a year, as consumers reporting a significantly more positive view of the job market and the economic growth. However, concerns about inflation may cause consumers to temper their spending in the coming months.
The Consumer Confidence Index, reported by the Conference Board, rose 19.3 points from 90.4 to 109.7 in March, the highest level since the start of COVID-19 pandemic. The Present Situation Index climbed 20.4 points from 89.6 to 110.0, while the Expectation Situation Index increased 18.7 points from 90.9 to 109.6.
Consumers’ assessment of current business conditions significantly improved in March. The shares of respondents rating business conditions “good” increased by 2.4 percentage points to 18.5%, while those claiming business conditions “bad” fell by 9.2 percentage points to 30.5%. Meanwhile, consumers’ assessment of the labor market was also more favorable. The share of respondents reporting that jobs were “plentiful” rose by 4.7 percentage points, while those saw jobs as “hard to get” declined by 3.9 percentage points.
Consumers were considerably more optimistic about the short-term outlook. The share of respondents expecting business conditions to improve increased from 30.7% to 40.8%, while those expecting business conditions to deteriorate decreased from 17.7% to 11.0%. Similarly, expectations of employment over the next six months improved. The share of respondents expecting “more jobs” rose by 8.7 percentage points to 36.1%, while those anticipating “fewer jobs” declined by 7.9 percentage points to 13.4%.
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 rose to 8.4% in March. The share of respondents planning to buy a newly constructed home increased to 2.7%, and for those who planning to buy an existing home inched up to 5%. However, surging home prices and lack of inventory could further harm affordability and hinder ownership opportunity.