Consumers Confident in Economy
The business group’s Consumer Confidence Index increased to 104.2 from an upwardly revised reading of 103.4 in the previous month. Economists had expected a reading of 101, according to Refinitiv. The March headline index saw a boost from consumers’ improved levels of confidence for the six-month-ahead time frame.
Expectations Index Boosted by Consumers’ Confidence
The Expectations Index increased to 73 in March from 70.4 in February, while the Present Situation Index dipped to 151.1 from 153. This indicates that consumers are optimistic about the future despite recent events in the banking industry.
“Consumers have not lost confidence and expect better days lie ahead. Consumers generally feel their money in the bank is safe for now. Fed officials backed away from more aggressive action on rates at last week’s meeting expecting that tighter credit conditions following the banking panic could slow economic growth in the future.”Chris Rupkey, chief economist for FwdBonds
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Recession Not Imminent Despite Slight Dip in Present Situation Index
The Present Situation Index dipped slightly, but this alone is not necessarily an indication of an upcoming recession. Ataman Ozyildirim, the Conference Board’s senior director of economics, explains that while the share of consumers who believe jobs are “plentiful” has decreased, the share of those who believe jobs are “not so plentiful” has increased.
Expectations of Inflation
Furthermore, consumer expectations of inflation over the next year remain high, at 6.3%. The survey also reveals that while plans for purchasing appliances have declined, there has been a slight increase in automobile purchases.
Consumers Plan to Spend Less on Activities
The Federal Reserve has been paying close attention to the services sector as it aims to control inflation. As the economy has recovered from the pandemic, consumers have shifted their spending habits towards services and out-of-home experiences, while leisure and hospitality industries have struggled to regain the jobs lost during the pandemic. This has led to concern among Fed officials, who are worried that rising wages and ongoing labor shortages could lead to inflation. While consumers plan to cut back on activities like gambling, amusement park visits, and travel, they are expected to spend more on healthcare, household maintenance, and car repair.
Consumer Confidence Key Indicator for US Economy
The Conference Board’s confidence index and the University of Michigan’s twice-a-month consumer sentiment index are two leading gauges of consumers’ attitudes toward the current and future strength of the economy. While the two indexes typically track similarly over time, the consumer confidence index is more influenced by employment and labor market conditions, while the Michigan sentiment index has a greater emphasis on household finances and the impact of inflation. Despite recent events in the banking industry, consumer confidence remains strong, indicating a positive outlook for the US economy in the coming months.
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