April 30, 2024

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The Conference Board reported that consumer confidence fell 6.1 points in April to 97.0 after having  fallen 1.7 point in March to 110.7 after declining 6.1 points in February.

Chief Economist at the Conference Board, Dana Peterson, said “Confidence retreated further in April, reaching its lowest level since July 2022 as consumers became less positive about the current labor market situation, and more concerned about future business conditions, job availability, and income.  Despite April’s dip in the overall index, since mid-2022, optimism about the present situation continues to more than offset concerns about the future.”

Despite the drop in consumer confidence we envision moderate economic growth in the months ahead.   The economy keeps cranking out new jobs which are showing few signs of slowing down very much   With the funds rate at 5.5% and the core CPI at 3.8% the real funds rate is +1.7% which may be high enough to slow the pace of economic facticity.  The bottom line is that the economy is likely to grow at roughly a 3.0% rate in the second quarter followed by 2.0-2.5% in the final two quarters of the year . . Wages are growing steadily which is boosting consumer income.   The Fed has boosted the funds rate from 0.0% to 5.5%, Given the magnitude of the earlier declines in confidence one might have expected a sharp pullback in consumer spending.  But that has not happened.  Instead, real consumer spending has risen 3.1% in the past year.  While they say they are worried, consumers still have a job with little chance of losing it any time soon, and their balance sheets are the best they have been since the 1980’s so they keep spending.

Confidence data reported by the Conference Board are roughly matched by the University of Michigan’s series on consumer sentiment.   As shown in the chart below, trends in the two series are identical but there can be month-to-month deviations.

Stephen Slifer

NumberNomics

Charleston, SC