According to a report from New York- based Conference Board, consumer confidence surged to a 16 year high. This means Americans are increasingly more confident about the current and future prospects of the economy. This is the highest level since December 2000.
Data from the Conference Board showed the Consumer Confidence Index reaching 125.6 this March while consensus economists estimates was only 114.
Lynn Franco, director of economic indicators at the Conference Board said, “Consumers’ assessment of current business and labor market conditions improved considerably. Consumers also expressed much greater optimism regarding the short-term outlook for business, jobs and personal income prospects. Thus, consumers feel current economic conditions have improved over the recent period, and their renewed optimism suggests the possibility of some upside to the prospects for economic growth in the coming months.”
The consumer confidence survey found that 32.2% of respondents said that business conditions are good. This is an increase from last month’s 28.2% who said that business conditions are good. Those that said business conditions were bad dropped to 12.9% from the previous month of 13.4%.
Consumer confidence is highly monitored because it can give some indication of where household spending is going. Household spending makes up 70% of America’s economic activity.
In February, there were 235,000 jobs created. Current gasoline prices is at $2.29 per gallon which remains generally unchanged since February. The survey also revealed that there were 14.1% respondents were thinking of purchasing a car over the next six months. Last month only 13.7% of the respondents were thinking of doing so.
As for purchasing a major appliance, 52.9% of the respondents were planning to do so compared to 49.9% from last month. 24.8% of the respondents also were optimistic that more jobs will be created in the latter part of the year.
There were also more optimism in the households that believed their incomes would increase in the next six months. 21.5% of the households surveyed were optimistic of income increases.
The labor differential measures the share of those who believe that jobs are abundant minus the share that believes that they are scarce. The labor differential surged to 12.2 points. It had 7 points last month.
However, the respondents seeking to purchase a house dropped to 6% from 6.5%. Mortgage interest rates has been rising for the previous months and this is a major deterrent for housing loan applications.
Ian Shepherdson, an economist at Pantheon Macroeconomics, said, “This astonishing result wasn’t foreshadowed by other consumer surveys, so our first thought is that it can’t last. But if we’re wrong, and sentiment really is as strong as these numbers suggest, then you should expect a sharp fall in the unemployment rate over the next few months, as signalled by the 8.7 point jump in the current conditions index, and a surge in consumers’ spending, as signaled by the 9.9 point leap in the expectations component.”