US consumer confidence started 2019 at well-above-average levels in a longer-term context, although readings were markedly lower than those which had been typical of most of the previous year. During the rest of 2019, US households maintained historically-high levels of confidence except for two short-lived plunges; one at the very start of the year and one in August.
The latest survey conducted by the University of Michigan indicates the average confidence level of US households has dropped significantly. The University’s preliminary reading from its Index of Consumer Sentiment registered 95.9 in March, under the consensus figure of 96.4 and noticeably less than February’s final figure of 101.0.
The University’s Surveys of Consumers chief economist, Richard Curtin, said a drop in share prices and increasing coronavirus infections were behind the decline.
US Treasury bond yields increased, especially at the long end but the moves were more in anticipation of a large fiscal response from the US Government to the economic fallout of the coronavirus pandemic. By the close of trade, the 2-year Treasury yield was 4bps higher at 0.51%, the 10-year yield had jumped by 21bps to 0.99% while the 30-year yield had gained 13bps to 1.55%.
In terms of US Fed policy, expectations of another rate reduction by the end of March remained high. According to end-of-day prices of federal funds futures, the implied likelihood of a 75bps cut at the FOMC’s March meeting fell from 50% to 23% while the likelihood of a 100bps reduction increased from 50% to 77%.