March Consumer Confidence: Feeling Low

March 25, 2008 – The Conference Board’s Consumer Confidence Index fell by 11.9 index points to 64.5 in March (Chart 1). This followed a similar February decline. Consumer confidence has now lost more than 47 index points compared to its July peak of 111.9.

Chart 1. The Consumer Confidence Index. February 1967 through March 2008.

March consumer confidence was the lowest since 61.4 in March 2003. That earlier weakness can be blamed on the war in Iraq. Most often, however, it takes a recession to push confidence this low.

Real consumption rose by 1.8% in the twelve months through January, slowing from a 3.2% gain in the twelve months through September last year (Chart 2). (The February consumption data are coming this week, on Friday.)

Chart 2. The Consumer Confidence Index and real consumption growth. January 1967 to date.

Consumer confidence and spending don’t always move right in step (see Chart 2). But, to the extent that they do, this time around, the March confidence data would be consistent with a much weaker trend in real consumption growth.

With consumers accounting for about 70% of U.S. GDP, that would be very bad news for the economy.

Suzanne Rizzo

Sources:

• The Conference Board, Inc. (http://www.conference-board.org) - the Consumer Confidence Index.
• U.S. Department of Commerce, Bureau of Economic Analysis (http://www.bea.gov) - real consumption.
• National Bureau of Economic Research (http://www.nber.org) - recession dates.