March Consumer Confidence Takes Sharp Decline

The Conference Board, New York, reported its Consumer Confidence Index declined sharply in March, as consumers’ short-term outlook all but collapsed.

The Index now stands at 120.0, down from 132.6 in February. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – decreased from 169.3 to 167.7. The Expectations Index – based on consumers’ short-term outlook for income, business and labor market conditions – declined from 108.1 last month to 88.2 this month.

“The intensification of COVID-19 and extreme volatility in the financial markets have increased uncertainty about the outlook for the economy and jobs,” said Lynn Franco, Senior Director of Economic Indicators with The Conference Board.  

Tim Quinlan, Senior Economist with Wells Fargo Securities, Charlotte, N.C., said economic indicators are starting to reflect the “bunker mentality” that mostly set in during March. “This comparatively modest dip in consumer confidence may not yet fully reflect the deteriorating labor market,” he said.

That consumer confidence “only” fell 12.6 points is a better outcome than the drop of more than 20 points expected by the consensus, Quinlan said, noting last week, the University of Michigan’s counterpart sentiment survey posted the largest monthly drop since October 2008.

Quinlan noted the cutoff for responses in Consumer Confidence was March 19, “certainly time enough” for coronavirus concerns to be reflected. “One explanation for the relatively modest decline is that perceptions of the strength of labor market are not in-sync with the most recent data.” He added, “further declines are sure to follow.”

The report said consumers’ assessment of current conditions was less favorable in March. The percentage of consumers claiming business conditions are “good” was relatively unchanged at 39.6 percent, while those claiming business conditions are “bad” increased, from 10.8 percent to 11.4 percent. Consumers’ assessment of the job market also moderated from last month. Those saying jobs are “plentiful” decreased from 46.5 percent to 44.9 percent, while those claiming jobs are “hard to get” was unchanged at 13.9 percent.

Consumers were significantly less optimistic about the short-term outlook. The percentage of consumers expecting business conditions will improve over the next six months decreased from 20.6 percent to 18.2 percent, while those expecting business conditions will worsen increased from 7.2 percent to 14.9 percent.

Consumers’ outlook for the labor market was also less positive. The proportion expecting more jobs declined from 16.6 percent to 15.5 percent, while those anticipating fewer jobs in the months ahead increased, from 12.0 percent to 17.1 percent. Regarding their short-term income prospects, the percentage of consumers expecting an increase declined from 22.7 percent to 20.7 percent, while the proportion expecting a decrease rose from 6.1 percent to 8.8 percent.