The latest data released on Friday, March 12, showed that the preliminary March reading of the University of Michigan’s consumer confidence index rose to 83, the highest since March last year, far exceeding economists’ expectations of 78.5 and the previous value of 76.8 in February. February’s preliminary reading had hit a six-month low with 76.2.
The analysis said that the widespread distribution of the new vaccine crown, as well as the high expectations for the Biden administration’s new $1.9 trillion fiscal stimulus package when the survey was conducted in early March, have boosted U.S. consumers’ economic outlook expectations to a one-year high.
The preliminary March consumer outlook index of 91.5 was a one-year high, better than the expected 88.3 and the previous 86.2 in February, while the preliminary March consumer expectations index of 77.5 was higher than the expected 72 and the previous 70.7.
Investors and policymakers are closely watching for signs of Inflation. Notably, the preliminary March reading of 1-year inflation expectations was 3.1%, below expectations and the February prior reading of 3.3%; the preliminary five-year inflation expectations were unchanged from the prior reading at 2.7%.
This represents a pullback in Americans’ inflation expectations for the coming year from the six-and-a-half-year high set in February since July 2014. However, this value was only 2.2% in March 2020, which shows that inflation expectations remain high.
Richard Curtin, director of the survey, pointed out that during the questionnaire period from February 24 to March 10, the confidence of households in the lowest 1/3 of income and people over 55 years old increased the most. However, most Americans are bullish on the overall economic trends for the coming year, and confidence in the growth of personal finances is gloomy. Sentiment toward household durable goods purchases has increased, but confidence in autos and homes has only marginally improved.
In particular, he mentioned that Americans’ inflation expectations for the year ahead remain high, although in the longer term, consumers believe inflation will fall back to lower levels, “although consumers believe that interest rates faced on Home mortgages and auto loans will rise over a 12-month period.”
Overall, he argued, the data suggest strong growth in U.S. consumer spending in the year ahead, with services such as travel and dining receiving the largest percentage increases; in early March, half of those surveyed said they heard favorable economic developments, particularly from the employment side.
After the release of the data, the ICE dollar index once narrowed to 0.42%, temporarily at 91.80. 10-year U.S. bond yields maintained gains of more than 8 basis points, hovering near a daily high of 1.6194%. Spot Gold narrowed its losses to nearly 1%, touching a short term high of $1,706.99.
Twenty-five minutes later, however, the 10-year U.S. bond yield rose strongly through 1.63%, breaking the highest since March 5 and the highest since February 2020, extending intra-day gains to nearly 10 basis points. This drove bank stocks higher as the dollar index re-expanded and pushed up to 92.
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