Tuesday’s Chicago PMI report was very weak relative to expectations, but investors received some consolation from a Consumer Confidence report that handily surpassed consensus forecasts. While economists were expecting March’s read on confidence to come in at a level of 96.6, the actual reading came in at 101.3, which was up 2.5 points from February. The March report was only the second triple-digit reading of the recovery, and just the fifth above average reading since 2007.
While Consumer Confidence was better than expected, March’s data was really skewed according to income levels, where confidence among higher income Americans increased and confidence among lower income Americans declined significantly. This trend has been in place throughout the entire recovery, but the divergence this month was especially large. For example, US consumers with incomes of more than $50K saw overall confidence increase from 118.8 up to 128.2. That was the largest one month increase since March of last year. For lower income consumers with incomes of between $35K and $50K, though, it was a completely different story. For this cohort, overall confidence actually declined from 97.7 down to 81.9. That was the biggest monthly decline since October 2008! Keep in mind that this decline came during a month when overall confidence was up.
The charts below show the monthly spread in Consumer Confidence between consumers with income above $50K and those with incomes between $35K and $50K. The top chart shows the monthly spread, while the bottom chart shows a six-month moving average which helps to smooth out the data. Following Tuesday morning’s March report on Consumer Confidence, the spread in confidence between these two income levels spiked by 25.2 percentage points to 46.3. Going back to 1987, this represents both a record level and record monthly increase. On a six-month moving average basis, this month’s reading of 32.07 is not quite a record, but it comes really close to the high of 32.22 that we saw just two months ago.