Consumers seeing green shoots this spring

Survey Results

The median forecast in a Bloomberg survey of 76 economists called for the consumer confidence reading to rise to 78.5 from a previously reported 78.1 in February. Estimates ranged from 75 to 80.

The Conference Board’s measure of consumer expectations for the next six months rose to 83.5 in March, the highest since September, from 76.5 a month before. Some 18.1 percent of respondents were more optimistic about business conditions, up from 17.3 percent a month earlier.

An increasing share of Americans said they expected jobs to become more available in the next six months. At the same time, fewer anticipated their incomes would accelerate.

“While consumers were moderately upbeat about future job prospects and the overall economy, they were less optimistic about income growth,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement. “Overall, consumers expect the economy to continue improving and believe it may even pick up a little steam in the months ahead.”

Weather’s Impact

Fading weather effects and an improving economy are boosting the consumer outlook at companies including General Mills, the Minneapolis-based maker of Cheerios cereal.

“We’re coming off a very severe winter,” and “we’re already seeing our categories strengthen a little bit as we get through that,” General Mills Chief Executive Officer Kendall Powell said in a March 19 call. “And as we’ve said in the past, while the economy is improving slowly and incomes are strengthening slowly, they are improving. And we think that as incomes continue to grow and consumers gain confidence that will be a positive sign for our category.”

Today’s consumer confidence data stand in contrast to other recent reports. The Thomson Reuters/University of Michigan preliminary sentiment index unexpectedly dropped to a four-month low in March. The Bloomberg Consumer Comfort Index showed Americans were the most pessimistic on the economic outlook than at any time in four months.

Present Conditions

The Conference Board’s present conditions measure fell for the first time in five months, to 80.4 this month from an almost six-year high of 81 in February. Consumers were less upbeat about the current labor market.

The labor market in February began to rebound from weather- related setbacks as employers added a better-than-expected 175,000 workers to payrolls after a 129,000 increase the prior month, according to data from the Labor Department.

Signs the economy is making progress after the slowdown early in the first quarter help explain why Federal Reserve policy makers last week reduced monthly asset purchases by another $10 billion beginning in April.

As Fed officials gauge the economy, they’re also monitoring the effects their policies may have on interest rates. Treasury yields jumped March 19 after Janet Yellen said in her first press conference as Fed chair that rates could rise “around six months” after asset purchases end, most likely in the fall.

Policy makers also said that the recovery in housing is still slow. That may give way to a pickup as more people take advantage of borrowing costs that, while higher than a year ago, are historically low.

“There’s a lot of demographic potential there for new household formation that would ultimately generate new construction,” Yellen said after the Fed’s policy meeting. “And the level of rates I think does matter, and the fact that they’re low now is something that should serve as a stimulus to people coming back into the housing market.”

 
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