Investing.com - Confidence among U.S consumers strengthened further in March as they recovered from a government shutdown that had pushed sentiment to a two-year low at the beginning of the year.
The University of Michigan's preliminary measure of consumer sentiment for March increased to 97.8 this month, compared to a forecast for 95.3 by economists.
The measure had fallen to 91.2 in January, its lowest level since October 2016, before rising to 93.8 in February.
The index is closely watched by economists because consumer spending accounts for about 70% of U.S. economic activity. The more upbeat attitude among consumers adds to evidence that a dismal drop in December retail sales, the worst in nine years, may have been an outlier. However, it contrasts sharply with figures released earlier Friday showing that the manufacturing sector's year-end slowdown is taking longer than expected to turn around. Manufacturing output fell by 0.4% in February, while the New York Federal Reserve's Empire State Index of manufacturing activity fell short of forecasts, hitting its lowest level in nearly two years.
The UMich survey’s chief economist Richard Curtin indicated that the gain in sentiment was entirely due to households with incomes in the bottom two-thirds of the distribution. “Lower-income households expressed much more positive assessments,” Curtin said.
Households with incomes in the top third account for more than half of all consumer expenditures, and Curtin said they recorded even higher levels of confidence. He argued this suggested that there is still no end in sight to the current cycle of economic expansion.
"The data indicate that real consumption will grow by 2.6% in 2019 and that the expansion will set a new record length by mid-year," Curtin concluded.
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