The Conference Board’s measure of consumer confidence rose sharply in March to 125.6, well above last month’s revised reading of 116.1 and smashing expectations for a modest decrease in the past month.
The index reached its highest level since December 2000, suggesting that memories of the great recession continue to fade and the post-election surge of optimism hasn’t ebbed.
Those surveyed were increasingly optimistic in their assessment of current economic conditions, but also expressed a growing confidence in the future outlook.
Much of the recent improvement in the collective consumer mood was clearly a direct byproduct of President Trump’s surprise victory in November, and the renewed hopes that a renewed focus on pro-growth policy would have the desired effect.
The administration’s recent struggles to deliver on its proposed repeal and replacement of the Affordable Care Act illustrates the political reality that – despite a Republican-controlled Congress – the administration faces a tough fight ahead to advance its agenda. The question then is whether or not consumers will remain upbeat if legislation stalls. At some point, those hopes for a stronger economy will fade if legislative victories remain elusive.
With labor conditions tightening and wage growth picking up, confident consumers appear poised to maintain spending growth, ultimately supporting the economy as a whole. Moreover, the various measures of business confidence also remain elevated, indicating improved business optimism and the potential for additional business capital expenditures and hiring – further stimulating growth.
The potential for a “virtuous cycle” appears to be present; whether or not that translates to a meaningful, sustained pickup in growth remains to be seen.