US consumer confidence at 2004 high in March but details weaker, UofM says

US consumer confidence moved higher still in March, hitting a 14-year high, but the details of the report appeared to point towards softness in consumption to extend into the second quarter, alongside higher inflation expectations.

The University of Michigan's consumer confidence index rose to its loftiest level since 2004, according to the preliminary results for the survey, hitting a level of 102.0, up from a print of 99.7 for the month before.

That was better than the dip to 99.5 which economists had penciled in.

All of the improvement in the index was the result of the improvement seen in the sub-index tracking sentiment around current economic conditions, which climbed from an end February level of 114.9 to 122.8.

The expectations sub-index on the other hand fell back from a reading of 90.0 to 88.6.

According to Richard Curtin, the survey director, all of the improvement in the confidence index was attributable to households in the bottom third of the income distribution (+15.7), while the economic assessment of those in the top third fell by a significant 7.3 points.

"In early March, favorable mentions of the tax reform legislation were offset by unfavorable references to the tariffs on steel and aluminum-each was spontaneously cited by one-in-five consumers.

"Importantly, near term inflation expectations jumped to their highest level in several years, and interest rates were expected to increase by the largest proportion since 2004," Curtin said.

That, he said, had led consumers to cite buying and borrowing ahead of the expected increases more favourably.

As well, incomes gains were still expected, but the quantum of the expected improvement returned to the lows recorded in the past year, Curtin added.

Significantly, as Curtin explained: "Among the top-third income households, income expectations fell more and inflation expectations rose more; as these households account for more than half of all consumption expenditures, the data suggest that the relative lull in consumption in the 1st quarter may persist for another quarter."