Consumer confidence rebounds in March

The upbeat report on consumer confidence is an encouraging sign for retailers, whose sales of spring fashions have been uneven amid cool temperatures. Economists closely track consumer confidence because consumer spending accounts for two thirds of all U.S. economic activity.

“It is encouraging that consumers are taking the negative things that are happening recently,” said Gary Thayer, chief economist at A.G. Edward & Sons Inc. “Possibly the employment situation is outweighing other concerns.”

Shoppers face conflicting reports about the economy. Job growth has been encouraging, and a rising stock market has helped boost confidence among higher-income consumers. But consumers also face higher energy costs than a year ago.

A government report last week also offered fresh evidence that the once-booming housing market is cooling. The Commerce Department reported that sales of new homes plunged by the largest amount in nearly nine years in February and the median price fell for the fourth month in a row. Higher interest rates could further slow down the housing market, but whether there will be a dramatic downturn remains to be seen.

Consumer spending has been buoyed by home equity lending, but as that trend has slowed, job growth has become more essential to fuel spending, Thayer said.

“If the job market remains good, I think consumer spending will be healthy,” he said. Nonetheless, Thayer believes that a sharp downturn in the housing market could sour confidence.

The report from the Conference Board said that consumers’ overall assessment of current conditions remains favorable, but their views on labor market conditions was mixed. Consumers saying jobs are “plentiful” increased to 28.4 percent from 27.4 percent, while those claiming jobs are “hard to get” moved up to 20.7 percent from 20.2 percent.

Consumers’ outlook for the next six months improved moderately in March. Consumers expecting business conditions to worsen decreased to 9.9 percent from 10.9 percent, while consumers expecting business conditions to improve increased to 18 percent from 16.2 percent.

The outlook for the labor market was also more upbeat. Those expecting fewer jobs to become available in the coming months decreased to 16.6 percent from 19.9 percent in February, while those expecting more jobs edged up to 13.9 percent from 13.4 percent.

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