Nobody asked them, but 19 percent of those who were polled for the University of Michigan’s preliminary sentiment index for April spoke up and said news about government policy and the raucous and often raw presidential primaries leaves them less positive about the national economy.
Not surprisingly, the widely watched barometer of the U.S. consumer’s mood slumped to 89.7, its lowest reading since September, from the most recent March reading of 91, but the longer-lasting concern is what effect such a development in public opinion, if it becomes a trend, would have on the economy in this election year.
Bloomberg reported that the one-year outlook index for the participants who made a point of talking about the election was 28 points lower than for those in the rest of the survey and the five-year view was 39 points weaker.
To be sure, the tenor of the election was not the only problem that weighed on the minds of those surveyed. Concerns about stagnant wages — also an election issue, interestingly — troubled them, as well.
“Consumers reported a slowdown in expected wage gains, weakening inflation-adjusted income expectations and growing concerns that slowing economic growth would reduce the pace of job creation,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement, although he added, optimistically, “These apprehensions should ease as the economy rebounds from its dismal start in the first quarter of 2016. Overall, the data now indicate that inflation-adjusted personal consumption expenditures will grow by 2.5 percent in 2016.”
Last week’s report on March retail sales provided further evidence of a weak first-quarter economy. The Census Bureau reported that sales fell 0.3 percent in March after an 0.4 percent decline in January and a flat February.
When motor vehicle sales are excluded, sales rose 0.2 percent for the month and are up 1.8 percent for the year through March, but clothing outlets, department stores, and food services and drinking establishments had losses.
“We’re having a little bit of a soft patch here for the consumer, with no obvious rationale,” Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, told Bloomberg. “It’s definitely a softer start to the year. Provided job gains remain as strong as they’ve been, we expect consumer spending should be OK.”
Bloomberg said economists caution against taking the retail sales report at face value because it is susceptible to large revisions and a lack of data about services, which account for almost 70 percent of purchases.
Bloomberg also cited a note by Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Ala. He said that because households are striving to reduce their debts, they’ll be better prepared to spend later.
“We are also seeing consumers pare down debt and build up savings, neither of which should be seen as a bad thing,” Moody said in the note.
Separately, the Labor Department said consumer prices rose 0.1 percent in March. The recent rebound in gasoline prices was partly offset by a drop in the cost of food.
“Overall inflation, for the time being, is back to where it was before December,” IHS Global Insight economist Chris Christopher told the Wall Street Journal. Inflation pressure should build during the year, but “the change will be very gradual.”
Stock investors bore up well during the week. Despite small losses on Friday, the Dow Jones industrial average, S&P 500 index and Nasdaq Composite Index ended the week with gains in a tight range of 1.6 to 1.8 percent.
This week we will see March activity among two of the economy’s heavier hitters — housing starts (today) and home resales (on Wednesday). In any economy, confidence is required of people who take steps to build a house or buy one that someone else built.
Reuters forecasts that housing starts, as measured by the Commerce Department, dropped to a seasonally adjusted annual pace of 1.170 million units in March from 1.178 million in February. Building permits are likely to have increased to a 1.2 million-unit rate last month.
Home resales probably rose in March after a sharp fall in February, Reuters said. Existing home sales, as measured by the National Association of Realtors, are expected to have gained 3.5 percent to an annual rate of 5.29 million units. Sales dropped 7.1 percent, to an annual rate of 5.08 million units in February.