WASHINGTON: US consumer confidence rebounded from a one-year low in March amid growing labor market optimism, but rising interest rates amid high inflation could hurt purchases of motor vehicles over the next six months and constrain consumer spending.
The labor market continues to favor workers, with other data on Tuesday showing job openings hovering near record highs in February. Tightening labor market conditions are boosting wages, providing some cushion against inflation. Consumers’ one-year inflation expectations shot up to the highest since 1987.
“A strong job market is helping households shoulder the worsening burden of rising prices,” said Tim Quinlan, a senior economist at Wells Fargo in Charlotte.
The Conference Board said its consumer confidence index rose to a reading of 107.2 this month from a downwardly revised 105.7 in February. Economists polled by Reuters had forecast the index decreasing to 107.0 from the initially reported reading of 110.5 in February. Unlike the University of Michigan’s consumer sentiment index, which fell to an 11-year low in March, the Conference Board survey puts more emphasis on the labor market.
The Conference Board’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, increased to a record high 47.4 this month from a reading of 41.5 in February. This measure correlates to the unemployment rate from the Labor Department.
Consumers’ upbeat views of the labor market were underscored by the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS report on Tuesday showing that job openings, a measure of labor demand, fell 17,000 to 11.266 million on the last day of February.
Despite the second straight monthly decline, job openings were not too far from a record high of 11.448 million set in December. Economists had forecast 11 million vacancies.
Job openings in the finance and insurance sector fell by 63,000 and decreased 39,000 in the nondurable goods manufacturing industry. But vacancies rose by 32,000 in the arts, entertainment and recreation sector, while education services reported 26,000 additional openings.
The job openings rate was unchanged at 7.0%. Hiring increased 263,000 to 6.689 million, led by construction. But hiring declined in the information sector. The hires rate climbed to 4.4% from 4.3% in January.
There were a record 1.8 open jobs per unemployed person in February, underscoring tight labor market conditions. The JOLTS report also showed the number of people voluntarily quitting their jobs rose to 4.352 million from 4.258 million in January. About 74,000 retail workers quit, while durable goods manufacturing saw 22,000 resignations. The quits rate was at 2.9%.
US stocks were trading higher amid signs of progress in peace talks between Russia and Ukraine. The dollar slipped against a basket of currencies. The widely tracked US two-year/10-year Treasury yield curve inched closer to inversion as traders bet that aggressive policy tightening by the Federal Reserve could hurt the economy over the longer term.
INFLATION EXPECTATIONS SOAR
Consumers’ inflation expectations over the next 12 months accelerated to 7.9%, the highest since the series started in 1987, from 7.1% in February. With inflation expectations surging, fewer consumers planned to buy cars over the next six months. But intentions to buy big-ticket items like refrigerators and washing machines increased.
Plans to buy a house were unchanged, remaining below January’s high reading as rising mortgage rates, combined with soaring prices, make home purchasing unaffordable, especially for first-time buyers.
House prices continue to soar amid tight supply. Builders have been unable to bridge the gap because of shortages and higher prices for inputs like softwood lumber for framing, as well as cabinets, garage doors, countertops and appliances.
A third report showed the S&P CoreLogic Case-Shiller’s 20 metropolitan area home price index increased 19.1% on a year-on-year basis in January after rising 18.6% in December.
Strong house price inflation was reinforced by a fourth report from the Federal Housing Finance Agency showing home prices accelerated 18.2% in the 12 months through January after advancing 17.7% in December. Annual price growth in excess of 20% was recorded in the Mountain, Pacific, South Atlantic and East South Central regions.
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