Should American Consumers Really Feel More Confident?

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Source: Thinkstock

Source: Thinkstock

Consumer confidence tells a far more optimistic story about the United States economy than the weekly readings of retail sales data. The Conference Board’s sentiment index rose to its highest reading since January 2008 this month. “Consumers spend based on their expectations and not based on their current levels of income, and consumer expectations were at a very healthy level this month,” Guy LeBas, the managing director of fixed income strategy for Janney Montgomery Scott, told Bloomberg. In March, more Americans were optimistic that employment opportunities will increase as the United States economic growth gains momentum. That sentiment means consumer spending gains are much more likely. Of course, weekly data collected by retail industry trade groups is limited in scope, but it does to some degree temper the picture painted by the Conference Board’s data.

Still, early in March — when the United States Department of Commerce announced retail sales had finally exited negative territory — economists were handed data that pointed an improving economy.

Job growth is accelerating while factory output and consumer spending are strengthening once again after posting concerning drops early in the year. “The consumer appears to be back in the game,” noted TD Securities deputy chief economist Millan Mulraine after the Department of Commerce’s February retail sales data was released. “We see this as further confirmation that the underlying momentum in the economy remains quite favorable.” In February, for the first time in three months, retail sales increased on a month-over-month basis, rather than decreasing. That retail sales growth reflects a comparable pickup in consumer spending, a measure that accounts for approximately 70 percent of gross domestic product in the United States.

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