Summary: US consumer confidence improves in March; University of Michigan index above consensus figure; views of present, future conditions both improve; gains widespread across all subgroups, regions; under-35s noticeably more confident; consumers “responding well” to fiscal package, vaccine rollout; jobs market.
US consumer confidence started 2020 at an elevated level. However, by March, surveys had begun to reflect a growing uneasiness with the global spread of COVID-19 and its reach into the US. After a plunge in April 2020, household confidence recovered in a haphazard fashion. Recent reading have consistently remained at below-average levels. However, there are now signs this situation may change in coming months.
The latest survey conducted by the University of Michigan indicates the average confidence level of US households lifted in March after deteriorating for two consecutive months. The University’s preliminary reading from its Index of Consumer Sentiment registered 80.0, above the generally expected figure of 78.0 and higher than February’s final figure of 76.2. Consumers’ views of current conditions and their expectations regarding future conditions both improved in comparison to those held at the time of the February survey.
“Consumer sentiment rose in early March to its highest level in a year due to the growing number of vaccinations as well as the widely anticipated passage of Biden’s relief measures,” said the University’s Surveys of Consumers chief economist, Richard Curtin. He said “gains were widespread across all socioeconomic subgroups and all regions” and noted the group which had consistently led past recoveries, the under-35s, was noticeably more confident than older groups.
US Treasury bond yields moved higher on the day, especially at the long-end. By the close of business, the 2-year yield had inched up 1bp to 0.15%, the 10-year yield had gained 9bps to 1.63% and the 30-year yield finished 8bps higher at 2.38%.
ANZ economist Hayden Dimes said, “Consumers are responding well to Biden’s fiscal package, the vaccine rollout and firmness in the jobs market.”
More-confident households are generally inclined to spend more and save less; some increase in household spending could be expected to follow. As private consumption expenditures account for a majority of GDP in advanced economies, a higher rate of household spending growth would flow through to higher GDP growth if other GDP components did not compensate.