The Conference Board (CB) Consumer Confidence Index beat expectations in March by 12.8 points, measuring in at 109.7. This is a 19.3-point increase on last month, and represents the highest index reading since the beginning of the pandemic.
The trade-weighted dollar index (DXY) was largely unchanged, despite this positive reading.
Across all areas of the report, consumers are looking more optimistic. The Present Situation Index jumped by 20.4 points, and the Expectations Index also rose a sizeable 18.7 points.
This release reads well for the US economy in the short to medium term. Consumers are more confident about their ability to purchase homes and cars in the coming months, with the percentage of consumers claiming business conditions were “bad” falling by 9.2 points. This can be seen as a positive assessment of the economic recovery plan in the US.
Consumers, however, are not without concern. Whilst economic activity may be picking up, concerns surrounding inflation were still prevalent. Rising gas prices are still expected (not helped by the recent Suez Canal incident), and this may reduce spending in the coming months.
These inflation concerns also showing themselves in the bond market, with the US 10-year Treasury yield reaching the highest levels since January 2020 this morning at 1.75%. Investors fear that continual increases to government spending will compound inflationary pressures.
Looking at other areas of the report, consumers have bettered their outlook regarding employment. The percentage of consumers expecting more jobs increased from 30.7 to 40.8.
Income expectations were a little more nuanced. While consumers expecting their income to increase rose by 0.7 points, a higher percentage of consumers also expected their income to decrease. This speaks to something of a widening income gap.
Overall, the data release today suggests consumers are assessing the US economy in the most positive light in more than a year. However, inflationary pressure could hijack the narrative as we move deeper into 2021.
Account Executive & Currency Analyst
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