UMich Confidence Rebounds In March As Low Income Americans Expect Big Pay Gains

Consumer confidence rebounded in March to 98.4 from last month’s 93.8, slightly above the average of 97.2 recorded in the past 26 months. The March gain in the Sentiment Index was entirely due to households with incomes in the bottom two-thirds of the income distribution.

Middle and lower income households more frequently reported income gains than last month, although income gains were still widespread among upper income households. Indeed, the last time a larger proportion of households reported income gains was in 1966.

Rising incomes were accompanied by lower expected year-ahead inflation rates, resulting in more favorable real income expectations ...

Finally, it should be noted that too few interviews were conducted following the summary release of the Mueller report to have any impact on the March data; if there is any, it may affect the April data. As noted in last week’s special report on the politicization of economic expectations, the divergence between Democrats and Republicans has remained substantial. It is unlikely that the average level of sentiment, however positive, has the same impact on consumer spending given the sharp political differences. Nonetheless, the data do not indicate an emerging recession but point toward slightly lower unit sales of vehicles and homes during the year ahead.