Consumer Confidence jumped in March after an unexpected decline in February. The Conference Board's Consumer Confidence Index was 110.2, up more than 15 points from the revised 95.0 in February. This exceeded economist's expectations of 98.8. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
Confidence increased across both portions of the Conference Board index. The Expectations portion of the index, measuring future economic activity, registered 109.3 in March, also up more than 15 points from a revised 94.0 in February. A quarter of survey respondents expected business conditions to improve in the next six months, the most optimistic outlook since 1993.
The Present Conditions Index, another factor in the total composite index, increased to 111.5 from 96.4 in February. This index is a measure of how consumers perceive the current state of the economy. Spending behavior is closely related to consumer's feelings in the Present Conditions Index.
The University of Michigan's February Consumer Sentiment Index, a comparable index, also increased in March to 95.7 from 90.7 in February. Both component indices also gained. The Present Conditions Index was 100.4 from 96.2 in February, and Expectations increased 5.5 points to 92.7.
Gains in both consumer confidence indices indicate that consumers are increasingly more optimistic about the current and future of the economy. Economists suggest that strong confidence reports could point toward a positive first quarter of growth, and that labor market conditions have probably bottomed out. However, they also warn that a lack of pent-up demand combined with the expectation that interest rates will rise later this year could dampen consumer spending. Rising gasoline prices may also affect consumer's disposable income.
Since consumer spending accounts for two-thirds of the U.S. economy, consumer confidence is a critical component for economic recovery. Overall, economists expect consumer confidence to continue to rise gradually, but not yet completely recover from losses in the past year.
Sources: www.cnnfn.com
www.conference-board.com
www.economy.com
