The last regional manufacturing survey before next week’s ISM is the March Chicago PMI index which rose a touch to 57.7 from 57.4 in February. That was a bit above the estimate of 56.9 and is the best since January 2015. As this number is very volatile month to month I like to smooth it out and which puts the 3 month average at 55.1 vs the 6 month average of 54.7 and the 12 month average of 53.8. The 10 months of 2016 leading into the election saw an average of 52.6. Thus, we’ve certainly seen an improvement post election but it’s not off the charts like some of the other regional surveys.
As for the internals, new orders rose 1.2 pts, backlogs were up too but are still below 50 and employment fell back below 50. Inventory building was apparent as this component is at the highest level since March 2015 as companies I’m sure anticipate quicker economic growth. Prices paid eased a bit but “successive rises in prices paid have placed the Q1 average at the highest since Q3 2011 and 12.1% above the last quarter’s level.”
Bottom line again, business sentiment is positive and it should be from the standpoint of regulation and taxes. But, to what extent that translates into faster and sustainable (outside of inventory building) growth still remains to be seen because it ain’t for sure reflected in Q1.
The final UoM consumer confidence index was 96.9, down from the preliminary print of 97.6, vs the estimate also of 97.6 and compares with 96.3 in February and 98.5 seen in January. This remains well above the 87.2 seen in October and 91.2 back in September. Versus February, the Expectations component was unchanged at the lowest since November. Current Conditions though were higher by 2.7 pts to 113.2 which is 6 pts above November. After the 5 pt jump in the Net Income component in the first read, the final print was up just 1 pt. Those expecting lower unemployment was up 2 pts vs February vs the first print of up 6.
As stated this morning with the mediocre consumer spending data in the first two months of the year, the household spending intentions within this data also remains mediocre. Those that said it’s a good time to buy a large household item was up 1 pt to 162 but was 164 last June and 166 last January. Those that said it’s a good time to buy a house fell 1 pt to 150. It was 157 in August and 158 last January. Finally on this, those that plan on buying a car/truck was up 2 pts to 147 but peaked at 152 last year.
One year inflation expectations were 2.4% vs 2.5% in February which compares with the 5 year average of 2.7%. A main driver of this (no pun intended) was “long term gas price expectations fell to their lowest level in more than a decade.” In these confidence survey’s, the price of gasoline has a big impact on psychology because it’s a price most drivers see every day, in contrast to many others.
Bottom line, consumer confidence is at a good level but remains very bifurcated depending on whether you are a Republican or a Democrat where as stated for a few months now, the data from “Democrats indicating an imminent recession, while the data from Republicans point toward a new era of robust growth. The disparity has not narrowed since Trump’s election.” As to what this partisan divide means for consumer spending, the UoM said “Optimism promotes discretionary spending and uncertainty makes consumers more cautious spenders, which will result in uneven gains over time and across products.” Well, we’ve certainly seen some uneven gains in consumer spending since the election.
I’ll also repeat that consumer confidence figures are NOT leading indicators so don’t start extrapolating out consumer spending trends from here. Consumer confidence peaked in January 2000, bottomed in March 2003, then rebounded up until January ’07 and then troughed in November 2008.