Real income growth in US will feeds through into stronger retail spending: Capital Economics

Quotes from Capital Economics:

- Despite falling in Feb, the Conference Board measure of US consumer confidence continues to show that consumers have started 2015 in an optimistic mood, and is consistent with decent consumption growth in the first quarter of this year. 

- The drop to 96.4 in February, from 103.8, simply reversed the gain the previous month. It was caused by falls in both the current conditions and expectations sub-indices. 

- At face value, this could be a worrying sign after the recent weakness in underlying retail sales and the fall in the alternative University of Michigan measure of confidence this month. However, barring last month's reading, the Conference Board index is still at its highest level in seven years and at a level consistent with annualized real consumption growth of around 3% in the first quarter of this year. 

- Overall, with real incomes continuing to be boosted by the rapid pace of jobs growth and the sustained low level of gasoline prices, consumer confidence should be rising again before long. Accordingly, we still think it's only a matter of time before this acceleration in real income growth feeds through into stronger retail spending.