Consumer Confidence Takes a Big Hit in March

The Conference Board has released its Consumer Confidence Index, which shows a decline in March after increasing in February. While the index is still quite positive at 124.1, this is more than a seven-point drop from the 131.4 reading in February. Dow Jones was calling for confidence to tick up rather than drop, and that consensus view was for 133 in March. The cutoff date for the preliminary results was March 14, which means that the data were accumulated prior to the public hearing from Fed Chair Powell that the FOMC would not be raising interest rates in 2019 after aggressive hikes in 2018.

The Present Situation Index was where the big decline took place. This measures a current assessment of business conditions and labor market conditions. That fell to 160.6 in March from February’s 172.8.

The Conference Board’s Expectations Index, which measures the short-term outlook for income and business and labor market conditions, posted a decline to 99.8 in March from 103.8 in February.

Like it or not, consumer confidence is one of the more widely followed economic releases. Confident consumers tend to spend more than less confident consumers, and consumer spending currently accounts for about two-thirds of gross domestic product.

Many areas accounted for the big drop here. Consumer assessment of the labor market was less upbeat, and their optimism about the short-term future moderated in March. Consumer outlook for the labor market was less favorable. Still, there was more optimism around income prospects.

The Conference Board data is shown below:

  • The percentage of consumers stating business conditions are “good” decreased from 40.6 percent to 33.4 percent.
  • Those saying business conditions are “bad” increased from 11.1 percent to 13.6 percent.
  • Those stating jobs are “plentiful” decreased from 45.7 percent to 42.0 percent.
  • Those claiming jobs are “hard to get” increased from 11.7 percent to 13.7 percent.
  • The percentage of consumers expecting business conditions will improve over the next six months declined from 19.6 percent to 17.7 percent.
  • Those expecting business conditions will worsen ticked up to 9.3 percent versus 9.2 percent the prior month.
  • The proportion expecting more jobs in the months ahead decreased from 19.0 percent to 16.4 percent.
  • Those anticipating fewer jobs increased from 12.3 percent to 13.4 percent.
  • On short-term income prospects, the percentage of consumers expecting an improvement rose to 21.0 percent in March from 20.6 in February.
  • The percentage of consumers expecting short-term income prospects to go down declined to 7.6 percent from a prior 8.3 percent.

Lynn Franco, senior director of Economic Indicators at The Conference Board, said:

Consumer Confidence decreased in March after rebounding in February, with the Present Situation the main driver of this month’s decline. Confidence has been somewhat volatile over the past few months, as consumers have had to weather volatility in the financial markets, a partial government shutdown and a very weak February jobs report. Despite these dynamics, consumers remain confident that the economy will continue expanding in the near term. However, the overall trend in confidence has been softening since last summer, pointing to a moderation in economic growth.

The only good news here is that the weaker confidence did not hurt the stock market gains. On last look, the Dow Jones industrials were up 262 points at 25,779 and the S&P 500 was up almost 30 points at 2,828. The yield on the 10-year Treasury remains stubbornly low at 2.425%.