The initial March UoM consumer confidence index fell to 63.4 from 67 and that was below the estimate of no change. Both Current Conditions and the Expectation components were lower m/o/m by similar amounts. One yr inflation expectations fell below 4% to 3.8% (lowest since April 2021 but still above the 20 yr pre Covid average of 2.9%) from 4.1%, helped by lower gasoline price assumptions while the 5-10 yr guess was lower by one tenth to 2.8%.
Employment expectations improved after the recent weakness, rising 6 pts while the current view of income was little changed but expectations fell. There was a drop in the mean % of those expecting family income to exceed inflation in the coming 5 years. Expectations for business weakened too.
Spending intentions weakened for all 3 main categories of auto’s, major appliances and homes.
It’s important here to understand that according to the UoM, 85% of the answers to this survey came in BEFORE the collapse of SVB and ALL of the drop in confidence came BEFORE SVB. The UoM said “Sentiment declines were concentrated among lower income, less educated, and younger consumers, as well as consumers with the top tercile of stock holdings. Overall, all components of the index worsened relatively evenly, primarily on the basis of persistently high prices, creating downward momentum for sentiment leading into the financial turmoil that began last week.” Also, “Of the interviews completed after March 9, only a handful spontaneously mentioned bank failures. Even for consumers with the largest stock holdings, sentiment had already fallen 9% between February and March 9 and moved very little thereafter.”
Specifically with respect to inflation (that while the rate of change is slowing, is still a MAJOR problem for many families), “high prices continued to be a primary drag on consumer attitudes. About 38% of consumers cited inflation for eroding their personal finances, essentially unchanged over the last three months.” And it is these still high prices as to why we saw weakness stated above on spending intentions.
As for the UoM bottom line post SVB and Signature, “consumers’ willingness to spend, particularly out of shrinking savings or costly borrowing, could soften, especially if financial institutions further tighten their supply of credit to consumers.” I agree.
UoM
One yr Inflation Expectations
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.