Consumer Confidence Rises to Second-Highest Since 2007
Consumer confidence increased in March to the second-highest level since August 2007 as Americans grew more upbeat about the outlook for the labor market and incomes.
The Conference Board’s index of sentiment climbed to 101.3 from 98.8 in the prior month that was stronger than initially reported, the New York-based private research group said Tuesday. The median forecast in a Bloomberg News survey of economists called for the gauge to hold at February’s previously reported 96.4 reading.
The gain in March was paced by households who looked forward to more employment opportunities and rising incomes in the coming six months. The pickup may help consumer spending, which accounts for 70% of the economy, rebound after a setback earlier this year.
“Consumers remain upbeat about the economy,” Gregory Daco, lead U.S. economist at Oxford Economics USA in New York, said before the report. “We expect that to continue, supported by ongoing employment gains, stronger wage growth and a muted inflation environment.”
Estimates in the Bloomberg survey of 70 economists in the ranged from 93 to 102. The Conference Board’s gauge averaged 96.9 during the last expansion and 53.7 during the recession that ended June 2009. In January, the index rose to 103.8, the best reading since August 2007.
Among other reports Tuesday, home prices in 20 U.S. cities appreciated at a faster pace in the year ended in January. The S&P/Case-Shiller index increased 4.6% after rising 4.4% in the year ended in December. Nationally, prices rose 4.5% in the 12 months through January.
Business activity in the Chicago area shrank in March for a second month as orders and production contracted. The Institute for Supply Management-Chicago Inc.’s business barometer improved to 46.3 from 45.8 in February. Readings lower than 50 signal pullbacks.
The Conference Board’s consumer expectations gauge for the next six months increased to 96, the second-highest reading in four years, from 90 in February. The measure of present conditions dropped to 109.1 in March from 112.1 in the prior period. The share of Americans who said business conditions were good held at 26.7%.
The Conference Board’s data showed Americans’ assessments of current and future labor-market conditions improved. The share of Americans who said jobs were plentiful rose to 20.6% in March from 20.3%.
The proportion of consumers expecting more jobs to become available in the next six months climbed to 15.5% from 13.8% in February.
The share of respondents that said they expected their incomes to grow in the next half year increased to 18.4% in March from 16.4% last month.
Companies including Fresh Market Inc., a natural and organic food retailer based in Greensboro, North Carolina, said low gas prices and an improving labor market are positive for sales. And while cheap fuel has bigger benefits for lower-income customers, versus the grocer’s middle-class shopper, “we’ve seen great traffic growth throughout the year,” Chief Financial Officer Jeffrey Ackerman said on March 25 at an industry conference.
“It could be that some of those people are now saying, well, I usually shop someplace else and now I want to make a special trip over to The Fresh Market, and go in there,” Ackerman said. “We feel like the economy is better.”
A gallon of regular gasoline cost an average $2.41 on March 30. That’s up from an almost six-year low of $2.03 reached in January, though below last year’s peak of $3.70.
Other sentiment indexes have shown signs of turning up after falling earlier this year. The Bloomberg Consumer Comfort Index rose to 45.5 in the period ended March 22, matching the second-highest level since July 2007, from 44.2 the prior week. Measures of the economy, buying climate and households’ financial well-being all improved.
The University of Michigan final gauge for March eased to 93 this month from 95.4 in February, capping the best quarter since 2004 as the labor market stayed strong and gasoline prices leveled off.
Continued gains in the labor market would probably help prop up consumer confidence. Employers have added an average 293,000 jobs per month over the past six months, the strongest such streak since the half-year ended March 2000, according to Labor Department data. At 5.5%, the unemployment rate is at an almost seven-year low.
While more Americans anticipate a pickup, according to the Conference Board’s report, wages so far have been slow to accelerate. While incomes climbed 0.4% in February, the increase was propelled by a jump in dividends, assets that not all households can access. Average hourly earnings climbed 2% in February from the year before, matching the average for the recovery, according to the Labor Department.
