US consumer confidence, based on the US Conference Board’s index, soared in March, jumping to 125.6, leaving it at the highest level since late 2000.
While the survey was conducted prior to the failure of Republicans to overturn the Affordable Care Act, also known as Obamacare, it was still a remarkably strong result, indicating that Americans are feeling truly ecstatic right now.
However, in what was an undoubtedly bullish report, there was one component that truly stood out: consumers’ views on the labour market.
They improved dramatically.
“The labour differential rose to 12.2 from 7.0, moving through its 2007 peak, with the proportion of people reporting jobs are ‘plentiful’ seeing its biggest monthly gain in 43 years, while the proportion saying they are ‘hard to get’ continued its downward trend,” said economists at ANZ.
Not only was the increase in respondents reporting that jobs were plentiful, it left the index at a 16-year high.
That suggests that already firm labour market conditions may be strengthening even further, a promising sign for helping to build wage pressures as the labour market tightens.
While the consumer confidence report suggests that’s taking place, it must be remembered that this is “soft” economic data, measuring perceptions rather than actual activity on the ground.
It’s the latter, ANZ says, that’s of far more importance to the US Federal Reserve moving forward.
“The Fed will be watching closely to see if confidence translates into spending, with reports of tough times in US retail,” it says.
“Personal income and expenditure data released later this week is expected to show modest consumption, with income and expenditure seen increasing 0.4% and 0.2% respectively.”
While most “hard” economic data has yet to respond to improved “soft” data, when it comes to households, ANZ thinks that there are now strong grounds for a pick-up in consumption levels, the largest component within the US economy.
“US household debt as a proportion of disposable income has been steadily declining, falling about 30 percentage points since its 2008 peak, suggesting a bit more headroom to borrow, should consumers — and banks — feel so inclined,” it says.
That’s the question that is yet to be answered, and the one that will play a crucial role in determining the outlook for US interest rates along with proposed US taxation reforms.