US headline consumer confidence better than underlying details, labor market sentiment weakens further

Consumer confidence in the US rose in March by 2.2 points to 96.6, while the figure for February was revised upwards. Slow income growth continues to frustrate consumers but headline seems to be better than the underlying details. The personal income and spending data for February released on Monday were disappointing. Real personal consumption expenditures are only 1.5% annual pace ahead of Q4. This has resulted in several forecasters to cut projections for Q1 2016 growth. The Atlanta Fed GDPNow projection for Q1 real GDP growth was lowered to just 0.6% as compared with the earlier forecast of 1.4%.

Even though the rise of 2.2 points in March consumer confidence might partially ease these concerns, there is less strength beneath the headline figure, according to Wells Fargo. All the rises in March consumer confidence index came from the expectation series that gauges how the consumers’ view of business conditions, income growth and employment outlook will appear in six months’ time.

In March, expectations rose to 84.7, increasing by 4.8 points. It was near the average for last six months. The volatility in stock market likely influenced expectations series heavily. The recovery in stock market assisted in reversing the increasing proportion of households anticipating deterioration of business conditions in the coming six months. Those expecting business conditions to worsen decreased from 11.6% to 9.2%, the lowest reading since August 2015.

Meanwhile, according to the Conference Board consumer confidence index, the present situation index fell to 113.5 in March, declining by 1.5 points. The figure for February was upwardly revised. But the March figure is almost 1.5 points more than the initial figure of February. Consumer’s outlook for labor market was also revised. February’s labor differential had earlier recorded a drop of 1.5 points to -2.1. According to the revised data, February’s labor market differential is just at -0.8, up 1.3 points from the initial report. Sadly, consumers believe that labor market weakened more in March. The jobs hard to get series rose 3 points, while labor market differential dropped to -1.2.

Furthermore, fewer consumers believe that their income will rise in the coming six months, whereas many believe it will decrease. The proportion of consumers anticipating incomes to rise dropped modestly to 17.2%, whereas the proportion expecting a drop in income increased to 11.8%.