The Conference Board’s Consumer Confidence Index rose slightly in March and is in moderately favorable overall. The composite index rose 1.5 points, or 1.4 percent, to 107.2 (see first chart). Compared to a year ago, the index has decreased by 7.8 percent. Small changes for months hide much larger changes in the two main components.
The expectation factor dropped to 4.2 points, taking it to 76.6 while the current-situation factor rose 10.0 points to 153.0 (see first chart). The expectation index is at its lowest level since February 2014 and is just 6 points above the 2001 recession low.
In the expectation index, all three components are lower than in February. The job market outlook weakened in March as expectations for more jobs fell 2.0 points to 17.4, while expectations for lower jobs fell 1.9 points to 17.7, and the net fell 0.1 point to -0.3 (see second chart). ))
The High Income Expectation Index rose 0.2 points to 14.9 whereas the Low Income Expectation Index rose 0.7 points, with the Net (Expected High Income – Expected Low Income) down 0.5 points to 1.2 (see middle of second chart).
The expectation index for good business conditions decreased by 2.6 points to 18.7 while the index for expected bad conditions increased by 3.9 points, which is net (expected business conditions are good – expected business conditions are bad) decreased by 6.5 points to -5.1 (see below third chart))
For the current situation indicator component, the current business situation and employment situation have improved. Net reading for current business conditions (current business conditions are good – current business conditions are bad) was -2.5 in March, rising to -7.5 but still a net negative. The current outlook for the labor market has seen the hard-to-find job index decline, down 2.2 points to 9.8 as the massive job index rose 3.7 points to 57.2, giving the net a 5.9-point rise to 47.4. A net above 40 is considered strong by historical comparison.
Inflation expectations rose to 7.9 percent in March, a record high; Expectations for January 2020 were 4.4 percent. Expectations of inflation remain extremely high as prices of many goods and services continue to rise at a rapid pace. The extreme outlook for inflation is the main driver of weak expectations among consumers. Rising prices for many consumer goods and services are mainly due to material shortages, tight labor markets and supply-side problems that hinder demand, although there has been some progress in increasing production. Russia’s aggression in Ukraine has exacerbated the pressure on fuel prices. Moreover, the newly initiated Fed tightening cycle increases the risk of policy errors and adds extreme levels of risk and uncertainty to the overall economic outlook.
Robert Hughes
Robert Hughes joined AIER in 2013 for over 25 years researching economic and financial markets on Wall Street. Bob was previously head of Brown Brothers Harriman’s Global Equity Strategy, where he developed an equity investment strategy that combines top-down macro analysis with bottom-up fundamentals.
Prior to BBH, Bob was a senior equity strategist at State Street Global Markets, a senior economic strategist at Prudential Equity Group, and a senior economist at Citicorp Investment Services and a financial markets analyst. Bob holds an MA in Economics from Fordham University and a BS in Business from Lehigh University.