The Conference Board Consumer Confidence Composite index rose 10.8 points in March to reach 125.6 points, the highest reading since December 2000. This was far better than analysts’ expectations and the fourth increase in the last five months. The Present Situation sub-index score was 143.1 while the Expectation sub-index came-in at 113.8, both scoring their highest levels in more than sixteen years.
Figure 1 shows that the present situation has now surpassed the level attained prior to the great recession. Solid stock market gains, low unemployment, plentiful jobs and rising wage pressures have combined to create enhanced confidence.
Consumers are feeling more bullish as their wealth is increasing as a result of stock market gains and increased home values. Moody’s economy.com is seeing an increasing link between the advances in the equity markets and the consumer confidence index. This is fine as long as growth continues, but an unexpected correction would likely send the consumer confidence index into a tumble. Another econometric metric the Conference Board monitors is the labor market differential. It measures the ratio of people who says jobs are plentiful vs. those who say that jobs are hard to find. This ratio surged from 7 to 12.2 in March, a cyclical high in this expansion. This indicates that wages will be under pressure in the months ahead, (Figure 2).
Consumers planning to purchase “big ticket” items improves in March. Those who planned to purchase an automobile within six months increased to 14.1%, up 0.4% from February. Those looking to by an appliance advanced by 3.0%, while folks looking to buy a house fell-back 0.5% to 6.0%.
At Gerdau we routinely monitor consumer confidence, readily available credit and spending habits since we know that increased consumer spending translates to stronger steel sales and vice versa.