According to the latest Conference Board report, the confidence in the US economy increased in March despite the recent turmoil in the banking sector.
The Consumer Confidence Index of the business groups increased from 103.4 to 104.2 in march, a reading that was revised upwards.
According to Refinitiv, economists expected a reading 101.
The headline index for March was boosted by consumers' increased confidence in the next six months. The Expectations Index rose to 73 in March from 70.4 the previous month, and the Present Situation Index dropped to 151.1.
The survey was conducted between March 20 and April 1, about 10 days after the state and federal regulators shut down Silicon Valley Bank.
In a Tuesday statement, Chris Rupkey said that despite the recent news headlines about the bank crisis, consumers still have confidence in the future and are expecting better days.
He said that 'additional banks haven't failed, and consumers feel safe in their bank accounts for the time being'. "Fed officials have backed off from taking more aggressive actions on rates during the last meeting, believing that tighter credit terms following the banking crisis could slow the economic growth in future."
A Conference Board Expectations Index reading of less than 80 often indicates that a recession is likely to occur in the coming year.
Ataman Ozyildirim is the senior director of Economics at the Conference Board. He said that the number of consumers who believe jobs are plentiful fell while those who think jobs are scarce rose. The latest results reveal that consumers' expectations for inflation in the next year remain high -- 6.3%. The overall purchasing plans for household appliances have continued to soften, while auto purchases are on the rise.
The survey also included a question on the spending of the service industry in the next six months. The survey respondents said that they would spend less money on gambling, visiting amusement parks and museums, traveling, and going to the movies. Health care, car repairs and household maintenance are the most popular categories of spending.
Federal Reserve has focused on the services sector as a way to reduce inflation.
As the economy recovered last year from the pandemic, consumers began to shift their spending away from goods and towards services and experiences outside the home. At the same, leisure and hospitality industries and others in the related fields struggled to recover the massive jobs lost during the pandemic. Fed officials are concerned about the impact of an increase in wages combined with a continued shortage of labor.
Consumer spending is a major driver of the US economy. Therefore, central bankers as well as economists are watching closely to see how much these expenditures decline.
Two leading indicators of consumer attitudes towards the current and future strength of an economy are the Conference Board's Consumer Confidence Index and the University of Michigan’s twice-monthly Consumer Sentiment Index. The two indexes tend to track each other over time. However, the consumer sentiment index places more emphasis on household finances, inflation and employment conditions.