U.S. consumer confidence dropped to a near three-year low in March as households worried about the economy’s near-term outlook amid the coronavirus pandemic, which has upended life for Americans.
The survey from the Conference Board on Tuesday came in the wake of reports last week showing the number of Americans filing for unemployment benefits racing to a record 3.28 million in the week ending March 21, and business activity hitting an all-time low in March. The country has ground to a sudden stop as authorities enforce strict measures to control the spread of the coronavirus, which causes a respiratory illness called COVID-19.
The United States has the highest number of confirmed COVID-19 cases, with more than 163,000 people infected. At least 3,017 people in the U.S. have died from the illness, according to a Reuters tally.
The Federal Reserve has taken extraordinary measures and President Donald Trump last Friday signed a $2.2 trillion stimulus package to ease the blow on the economy, which economists believe is already in recession.
The Conference Board said its consumer confidence index decreased to a reading of 120.0 this month, the lowest since July 2017, from an upwardly revised 132.6 in February.
Economists polled by Reuters had forecast the index falling to 110.0 in March from the previously reported reading of 130.7 in February. The smaller-than-expected decline in confidence is likely because the cutoff date for the survey was March 19, before many states and local governments ordered residents to stay at home or shelter in place, and shuttered restaurants, bars and other social-gathering venues.
The Conference Board said it expected further declines as the fallout from the coronavirus intensifies and viewed March’s drop in confidence as being “more in line with a severe contraction, rather than a temporary shock.”
“The consumer confidence index is likely to continue to fall as the hit to the economy is going to be even harder than it was in the Great Recession over a decade ago,” said Chris Rupkey, chief economist at MUFG in New York. “We are starting to lose confidence ourselves that the economy can be restarted as easily as government officials are saying as the expected length of the coronavirus shutdown grows ever longer.”
The dollar was little changed against a basket of currencies. U.S. Treasury prices rose. Stocks on Wall Street were trading higher as the worst first quarter for the S&P 500 since 1938 ended.
GRIM NEWS FROM TEXAS
Other data on Tuesday showed manufacturing activity in the Midwest contracted further in March. The Chicago Purchasing Management Index, also known as the Chicago Business Barometer, dropped to a reading of 47.8 this month from 49.0 in February.
The index is jointly developed by MNI Indicators and ISM-Chicago. A reading below 50 means the Midwest manufacturing sector is contracting.
News from Texas was very grim, likely reflecting the slump in crude oil prices because of the coronavirus and an oil price war between Saudi Arabia and Russia. The Dallas Fed said its general business activity index fell over 85 points to a record -78.8 this month, while the company outlook index plunged 80 points to an all-time low reading of -75.3.
The revenue index, a key measure of state service sector conditions, plummeted to a historic -67.0 this month from a reading of 14.0 in February. There were also steep declines in employment and workweek measure, which also recorded negative readings.
The deterioration in labor market sentiment was also captured in the Conference Board survey. The survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, fell to 31.0 in March from 32.6 in February.
That measure closely correlates to the unemployment rate in the Labor Department’s employment report. That together, with a wave of layoffs caused by the coronavirus business shutdowns, suggests the unemployment rate likely increased this month from 3.5% in February.
Labor market strength was the economy’s main pillar of support, through steady wage growth and consumer spending.
The percentage of consumers expecting an increase in income declined to 20.7% this month from 22.7% in February and the proportion anticipating a drop rose to 8.8% from 6.1%.
A third report on Tuesday showed the S&P CoreLogic Case-Shiller 20-metro-area house price index increased 3.1% from a year ago in January after rising 2.8% in December.
House price inflation could ease as economic disruptions slow demand for homes. In addition, builders have been ramping up construction, helping to bridge an inventory gap that has kept house prices elevated.
Single-family homebuilding, which accounts for the largest share of the housing market, increased in February to the highest level since June 2007, government data showed this month. Completions of single-family housing last month were the highest since December 2007, and the inventory of homes under construction rose to levels last seen in December 2006.
“The world is a very different place than it was in January, but today’s Case Shiller release is sure to offer some fond memories of the not-so-distant past, and some hope that the industry can continue the growing momentum it was riding to begin the year once this crisis passes,” said Matthew Speakman, an economist at Zillow.
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