Consumer Confidence Jumps as Outlook Continues to Improve – Robert Hughes (03/31/2021)

The Consumer Confidence Index from The Conference Board rose in March, jumping 19.3 points to 109.7, the highest level in a year. Overall consumer confidence remains well below the pre-pandemic level but is now significantly above the lows of the lockdowns, especially for the present situation (see top of first chart).

The two major components of the index both had strong performances for the month. The present-situation component rose 20.4 points to 110.0 while the expectations component gained 18.7 points, taking it to 109.6 from 90.9 in the prior month (see top of first chart). Of the two components, the present situation index had seen a much bigger decline relative to the expectations index, yet both are currently holding near similar levels. The details of the report suggest that consumers are growing significantly more optimistic though there is also rising concern over the potential for an acceleration in consumer price increases.

Regarding general business conditions, the net of the percentage of consumers saying business conditions were good rose 2.4 points to 18.5 while those saying business conditions were bad fell 9.2 points to 30.5 in March. Those results put the net business conditions percentage at -12.0 for March, the best level since March 2020.

For the labor market, the net percentage of consumers saying jobs were plentiful gained 4.7 points to 26.3 while those saying jobs were hard to get fell 3.9 points to 18.5. The net percentage for current labor conditions comes in at 7.8 for March, up from -0.8 in February and well above the -15.7 in April 2020 (see bottom of first chart).

Regarding consumer expectations, consumers’ expectations for business conditions in six months, the percentage expecting good conditions surged to 40.8 from 30.7 while the net percentage expecting bad conditions fell 6.7 points to 11.0. The net percentage for business conditions six months ahead rose 16.8 points to 29.8, the highest since June 1983.

Consumer expectation for the labor market also improved markedly, as the percentage expecting more jobs rose 8.7 points to 36.1 while the percentage expecting fewer jobs dropped to 13.4. The net percentage for the outlook for jobs came in at 22.7, the second-highest on record behind the 24.0 result in June 2020 (see bottom of first chart).

Overall, the survey results suggest consumer attitudes have become significantly more optimistic. The rollout of vaccines and reduction of government-enforced restrictions on consumers and businesses are likely driving the improved view of current conditions and expectations. However, views of current conditions and expectations for the future remain at historically modest levels overall and there is rising concern about consumer price increases which could temper spending intentions in the future.

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