News & Events

Economic Advisor: April 4, 2018
April 4, 2018


Reports on how consumers feel about the economy were mixed, while consumer incomes and spending increased.

Consumer Sentiment

The Index of Consumer Sentiment grew 1.7 percent to 101.4 in March from February’s 99.7, according to last week’s report from the University of Michigan’s Surveys of Consumers. This was the index’s highest level since 2004, and compared to the same period last year, March’s index was 4.6 percent higher than March 2017’s 96.9.

The Current Economic Conditions index, which tracks how consumers feel about their present economic situation, grew 5.5 percent from 114.9 in February to 121.2 for March. March’s level marked a record high for the index. That said, the Index of Consumer Expectations, how they expect the economy to fare in the near term, dipped 1.3 percent from February’s 90 to 88.8 in March.

“The consensus expectation among consumers is that interest rates will increase in the foreseeable future,” the Surveys of Consumers Chief Economist Richard Curtin, wrote in a research note. “While consumers view the current level of interest rates as still relatively low, they understand that interest rate hikes are intended to dampen the future pace of economic growth. Their reaction will both emphasize borrowing-in-advance of those expected increases as well as heighten their precautionary savings motives.”

Consumer Confidence

Meanwhile, The Conference Board’s report had a different story to tell. The Board’s Consumer Confidence Index dropped to 127.7 in March from an 18-year high of 130 in February (a baseline of 100 was set in 1985). The Present Situation Index, which describes how consumers feel about their current economic circumstances, decreased from 161.2 in February to 159.9 in March. The Expectations Index, which tracks how consumers feel about their economic prospects for the near future, ticked down from 109.2 in February to 106.2 in March.

“Consumers’ assessment of current conditions declined slightly, with business conditions the primary reason for the moderation,” noted Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ short-term expectations also declined, including their outlook for the stock market, but overall expectations remain quite favorable. Despite the modest retreat in confidence, index levels remain historically high and suggest further strong growth in the months ahead.”

So, why the difference in the two reports? There are a few reasons for that: First, the Surveys of Consumers collects data throughout the month, whereas The Conference Board collects its data in the middle of the month. In terms of scale, the Surveys of Consumers asks more questions to a wider number of people. Also, the two reports emphasize different questions, with The Conference Board focusing more on jobs, while the Surveys of Consumers stressing consumer prices.

Personal Incomes and Spending

Looking at consumers’ actual activity, personal incomes grew $67.3 billion, or 0.4 percent in February according to last week’s report from the Bureau of Economic Analysis. Disposable personal income (DPI; money after taxes) increased $53.9 billion, or 0.4 percent, and personal consumption expenditures (PCE; money spent on goods and services) notched up $27.7 billion, or 0.2 percent.

Personal outlays — all the things that consumers pay for, such as interest on loans, bills, mortgages, as well as goods and services —increased $27.8 billion in February. Meanwhile, personal savings totaled $497.4 billion in February. This put the personal saving rate — personal saving as a percentage of DPI — at 3.4 percent for the month.

This week, we can expect:

  • Monday — Construction spending for March from the Census Bureau.
  • Tuesday — Car and truck sales for March from the auto manufacturers.
  • Wednesday — Factory orders for February from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; February’s trade deficit from the Census Bureau.
  • Friday — Consumer credit for February from the Federal Reserve; payrolls, unemployment rate, and average hourly earnings for March from the Bureau of Labor Statistics.

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