The consumer spending growth rate is expected to continue to rise in the second quarter.
That’s the conclusion of IHS Global Insight economist Chris Christopher. Contributing to the upbeat forecast is today’s employment report, which showed that U.S. employers added 215,000 jobs in March. The addition of jobs suggests a healthy labor market domestically.
“The stock market volatility in the first two months of the year took a toll on consumer spending and consumer confidence. The reversal in consumer sentiment in the last half of March is good news and is a signal that consumer spending is likely to end the first quarter on a high note,” Christopher said.
The University of Michigan’s consumer sentiment index is at 91 for the final March reading, dipping just 0.7 point from the final reading in February. Although the March report fell 1.7 points in the first half of the month, it rose one point in the second half. Of its two components, the current economic conditions fell 1.2 point in March, while its consumer expectations portion fell 0.4 points.
Earlier this week, the Conference Board released its latest survey results for the Consumer Confidence Index for March. The Index also showed a rebound in consumer sentiment, with the Index now at 96.2, up from 94 in February. The Index also has two components, with the present situation portion slipping to 113.5 from 115 and the expectations part rising to 84.7 from 79.9. The expectations component is considered more important since it reflects sentiment from respondents six months out. Those who said they expect business conditions to improve over the next six months inched up 15 percent from 14.5 percent, while those who said they expect more jobs in the months ahead increased slightly to 12.9 percent from 12.2 percent.
Lynn Franco, director of economic indicators at The Conference Board, said consumers’ expectations regarding the short-term “turned more favorable as last month’s turmoil in the financial markets appears to have abated.”
IHS has a real consumer spending growth forecast of 1.8 percent for the first quarter.
According to Christopher, “There are several positives working in favor of improved consumer mood: low pump prices, lower household utility bills, modest consumer price inflation and relatively positive employment reports.”
The economist concluded: “Consumer spending is likely to spring forward at a stronger growth rate in the second quarter.”