There were only two major economic reports last week, but they gave us a look at the all-important consumer. The week ahead will be a busy one for economic news, including the major business surveys.
Last week’s news
On Tuesday, the Conference Board released its Consumer Confidence Index, which declined from an 18-year high of 130.8 in February to 127.7 in March. This result was below expectations of a small increase to 131, and the drop came from both the current conditions and expectations surveys. Plus, it may have reflected some stock market turbulence, as well as an increase in gas prices. Despite the decline, confidence remains at an extremely high level—the second highest since December 2000—and is still a positive signal for the economy.
On Thursday, the personal income and spending report was released. Personal income growth remained at 0.4 percent for February—the same as January and a strong level—on continued strong job growth and slow but steady wage growth. Personal spending growth did better than expected. It stayed steady at 0.2 percent for February, which was the same as January and above expectations of a 0.1-percent gain. Given the weather-related drop in utilities spending and a decline in gas prices, this number is actually better than it seems, but the tax cuts are not yet boosting consumption as expected.
What to look forward to
On Monday, the Institute for Supply Management (ISM) Manufacturing survey dropped slightly, from an extremely strong 60.8 in February to 59.3 for March. This was slightly below expectations of 59.7, but still a very strong result. The February result was the highest in almost 14 years, and the small pullback still leaves the survey at a very strong level. This is a diffusion index, where numbers above 50 indicate expansion, so the current level indicates healthy growth.
On Wednesday, the ISM Nonmanufacturing survey is expected to pull back slightly. The February result of 59.5 is expected to tick down to 59, which is not quite as good as the Manufacturing survey, but still indicative of strong growth. Between the two results, business looks to continue as a positive force for the economy.
On Thursday, the international trade report is expected to show a small worsening of the trade deficit, from $56.6 billion in January to $56.8 billion in February. Exports have rebounded while import growth has moderated, but one-time factors are likely to pull down the final result. Trade is anticipated to be a drag on growth in the first quarter, but the numbers do seem to be improving overall.
Finally, on Friday, we’ll see the employment report. It is expected to show that job growth moderated significantly, down from 313,000 in February to 189,000 in March. The February number was much higher than expected, so even with a pullback, the employment market would be in good shape. There may be some upside potential here, as the flu epidemic may have slowed job growth in February. The unemployment rate is expected to drop from 4.1 percent to 4 percent, while wage growth is expected to rise by 0.2 percent on a monthly basis and 2.8 percent on an annual basis. Overall, if the numbers come in as expected, this would be a healthy report.
Have a great week!