UofM Confidence

The preliminary UoM consumer confidence index for March rose to 97.6 from 96.3 in February and that was slightly above the estimate of 97.0. Since the October one yr low of 87.2, we saw it get to as high as 98.5 in January. This are the best levels of this recovery and compares with the levels seen in the mid 2000’s but still below the 1990’s party. Almost all of the gain came in the Current Conditions component which rose 3 pts to the best level since 2000 while Expectations was up just .2 pts. UoM said this particular component continues to be bifurcated on a partisan basis. “Among Democrats, the Expectations Index at 55.3 signaled that a deep recession was imminent, while among Republicans the Index at 122.4 indicated a new era of robust economic growth was ahead. Interestingly, those who self-identified as Independents had an Expectations Index of 88.3, which was nearly equal to the midpoint of the partisan gap.” After rising to a multi month high in February at 2.7%, one year inflation expectations fell 3 tenths to 2.4% and back to where it was in September thru November.

Looking within, those expecting Higher Income rose 2 pts to 37 and that’s where it stood in November right after the election vs 32 in October. The employment component saw a nice gain of 6 pts and stands at the best level since 1984. With respect to whether the rise in confidence is translating into buying intentions, it was mixed. Those that said it’s a good time to buy a major household item rose 2 pts but after falling by 4 pts last month. It still though is up 6 pts since October. Those that said it’s a good time to buy a vehicle was up by 6 pts to the highest since May. Those that said its time to buy a house was unchanged after falling by 6 pts last month.

Bottom line, it’s good to look at consumer confidence in terms of feeling the pulse of 2/3 of the US economy but because it’s only a coincident indicator it’s never very good at telling us about future behavior. The index peaked in January 2000 at the bubble peak, bottomed in March 2003 just as the recession was ending, peaked again in January 2007 just as the US credit markets started to blow up, and bottomed in November 2008 when things were at its worst. See chart: