The Conference Board Consumer Confidence Composite index fell back 4.6 points in April to 120.3 points. Despite the decline the index remains at an elevated level. On a three month moving average (3MMA) basis, the confidence index scored 120.4, its highest level since January 2001. Consumers feel good about the current state of economy and are exuberant about the future.
On a 3MMA comparison, the index is up 25.5 points or 20% year on year (y/y). This was the largest y/y change since January 2015. Figure 1 shows that the present situation has now surpassed the level attained prior to the great recession. The 3MMA Expectation index moved up 2.4 points to 107.6 or 30% higher than a year ago. The composite index (present + expectation) index was up 3.2 points to 120.4 or 27.0% y/y. Consumers’ purchase intentions were a toss-up as home buying plans fell 0.4 points to 5.8%, while auto purchase plans increased 0.4 points to 14.2%. Consumers planning to purchase an appliance sometime over the next six months rose 1.1% to 52.6%, whereas vacation plans were flat at 48.6%
Overall conditions are favorable for continued growth in the economy which appears to be tied to gains in the equity markets together with rising home values. There is a differing of opinion relevant to income and age cohort. The largest gains in recent months are skewed to those over 55 with slight negative responses in the under 35 crowd and moderate gains in the middle aged segment. Households making north of $50,000 per year reported the largest increases in confidence. Not surprisingly those earning less than $15,000 reported a bit less optimistic outlook over the last few months.
This should be a good year for consumers. The rebounding housing market this will boost spending on the durable goods and services necessary to outfit these new homes. Credit quality and availability remain in good shape which will support further spending. In addition, higher wages will result from a near full-employment economy that in-turn will lead to more spending.
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.