Consumers remain confident despite scarcity of jobs and higher gas prices
ANN ARBOR, Mich.Consumer confidence improved in March as consumers anticipated more favorable prospects for their personal finances. "The gain in confidence was recorded despite persistent concerns about slower job growth and higher gas prices," according to Richard Curtin, the Director of the University of Michigan’s Surveys of Consumers. Consumers anticipated that the rate of growth in the economy would slow during the year ahead, and expected continued weakness in employment growth. "Consumers were concerned that the slower pace of economic growth, higher productivity, and global outsourcing would keep employment growth at lower than normal levels during the year ahead," said Curtin.
The Index of Consumer Sentiment was 95.8 in the March 2004 survey, up from 94.4 in February and well above the 77.6 recorded a year ago in March 2003. The Expectations Index, a closely watched component of the Index of Leading Economic Indicators, was 88.8 in the March 2004 survey, just ahead of the 88.5 in February, and substantially above the 69.6 recorded a year ago. The favorable level of the Sentiment Index indicates that total growth in personal consumption expenditures will average about 3½ % during the year ahead.
The uncertainty about job prospects is about more than just the timing of future gains in employment. "Consumers have expressed apprehensions about the viability of their job skills as labor markets change due to higher productivity and global outsourcing of jobs," according to Curtin. The election debates about the potential remedies will keep consumers’ anxiety at high levels during the year ahead. "The most recent survey found the lowest level of confidence in government economic policies since President Bush was first elected," Curtin said.
Consumers expected the pace of economic growth to gradually slower during the year ahead. "The majority of consumers viewed prospects for the national economy favorably, but nonetheless were more likely to expect the pace of growth to slow by the end of 2004," Curtin noted.
Consumers evaluated their personal financial situation more favorably in March. "Consumers more frequently reported income gains in March, which more than offset their more frequent complaints about rising gas prices," Curtin said. Just one-in-ten consumers expected their financial situation to worsen in 2004 despite the widespread expectation of a higher inflation rate.
Consumers held more favorable buying attitudes in the March 2004 survey. Low mortgage rates continued to bolster home buying attitudes, despite the fact that the fewest consumers in twenty years thought that current home prices were attractively low. Vehicle buying plans benefitted from the deep discounts offered by vehicle manufactures, mentioned by three-in-four consumers in March. While both home and vehicle sales will remain near record favorable levels in 2004, the survey data indicates that little if any year-to-year gains in sales can be expected.