According to analysts from Wells Fargo, despite the increase in consumer confidence in March, the headline looks better than the underlying details as consumers remain frustrated by sluggish income growth.
Key Quotes:
“Monday’s disappointing February personal income and spending data put added focus on today’s consumer confidence report. Real personal consumption outlays are running at just a 1.5 percent annual pace ahead of the fourth quarter, leading many forecasters to scale back expectations for first quarter growth.”
“All of the increase in the Consumer Confidence Index during March came from the expectations series, which measures how consumers feel business conditions, employment prospects and income growth will look six months from now. Expectations jumped 4.8 points to 84.7 in March, which is close to its average for the past six months. The expectations series tends to be more heavily influenced by swings in the stock market.”
“The rebound in the stock market helped reverse the growing proportion of consumers expecting business conditions to worsen over the next six months, with that figure falling 2.4 percentage points in March to 9.2 percent, its lowest reading since last August.”
“Unfortunately, consumers feel that the labor market weakened further in March, with the jobs hard to get series jumping 3 full points and the labor market differential falling to -1.2. Moreover, fewer consumers feel their income will increase over the next six months while more feel their incomes will decrease. Taken together, these two series reveal a great deal about the debate as to which matters more—the weaker GDP number or the stronger employment data.”
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