- Rick Wilking/Reuters
- Consumer sentiment rose more than expected to 97.8 in the first half of March.
- Increasing optimism was concentrated among lower- and middle-class households.
- The gains come after disappointing sentiment readings at the beginning of 2019.
Public confidence in the economy rose more than expected in the US in early March, particularly among lower- and middle-class households.
Consumer sentiment rose 4.3% from a month earlier to 97.8, preliminary results from the University of Michigan’s monthly survey showed Friday, compared with economist expectations for a 95.6 reading. Final results are scheduled to be released at the end of the month.
Lower- and middle-class Americans were more optimistic toward income potential, pulling the index higher. Overall sentiment jumped among households with incomes in the bottom two-thirds of the distribution, while the top income bracket’s confidence in the economy rose at a much slower pace.
“Since households with incomes in the top third account for more than half of all consumer expenditures, cautious observers will conclude that the latest data are another indication that the end of the expansion is on the distant horizon,” said Richard Curtain, the survey’s chief economist.
All income groups were more positive about growth prospects for the overall economy – a rebound following weaker-than-expected consumer sentiment reports in recent months.
Financial-market turmoil at the end of 2018, fading stimulus, and the partial government shutdown that ended in January have weighed on outlooks toward the economy. Sentiment in February made a modest recovery after falling to its lowest level since October 2016 a month earlier.
But consumers appear to have shaken off some of this uncertainty, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics, with expectations for the future rising to just off the September high.
“This matters, because it strongly supports our view that the slowing in consumption in recent months is more likely to be a transition to a sustainable pace, as the kick from tax cuts and lower gas prices fades, rather than the start of a sustained downtrend, ultimately leading to the end of the cycle,” he said.
On Tuesday, data showed optimism among small businesses rebounded last month after also falling to a more than two-year low.
“Small business owners are thankful to have the government shutdown in the rear view mirror but need more certainty about the future,” said Juanita Duggan, NFIB president and CEO.