Consumer Confidence, Durable Goods Data Points to Slumping Economy

Weak consumer confidence and a disappointing lack of significant growth in durable goods sales are pointing to a weakening American economy.  Durable goods sales rose just 0.8% in March after a 3.1% decline in February; despite expectations of a growth rate twice that. Core durable goods growth actually fell 0.2% after falling in February, although analysts had expected moderate growth.

Weak consumer confidence and a disappointing lack of significant growth in durable goods sales are pointing to a weakening American economy.  Durable goods sales rose just 0.8% in March after a 3.1% decline in February; despite expectations of a growth rate twice that. Core durable goods growth actually fell 0.2% after falling in February, although analysts had expected moderate growth.

According to the Census Bureau, the increase in durable goods sales was mostly a result of transportation equipment demand, which rose 2.9% in March and offset declines in shipments. In total, new orders rose just $1.8 billion, while shipments fell $1.1 billion. Capital goods orders also fell 1.1% in nondefense sectors.

Weak Consumer Sentiment

Weakness in durable goods orders may be a result of weakening consumer demand, as average Americans continue to struggle against a backdrop of flat or declining real wages and a decline in high-paying jobs.

Consumer confidence fell to 94.2, below 96.1 in March, according to The Conference Board’s Consumer Confidence Index. The Expectations Index—, which tracks consumers’ hopes for future economic strength—plummeted to 79.3, one of its lowest readings since 2009.

The Conference Board’s Director of Economic Indicators, Lynn Franco, pointed out that the index’s fall was modest and can be characterized as a “sideways” trend. “Consumer confidence continued on its sideways path, posting a slight decline in April, following a modest gain in March,” she said.

“Consumers’ assessment of current conditions improved, suggesting no slowing in economic growth. However, their expectations regarding the short-term have moderated, suggesting they do not foresee any pickup in momentum.”

The study also showed that Americans are more pessimistic about the job market, even as unemployment rates continue to fall. “Consumers’ outlook for the labor market was also less favorable. Those anticipating more jobs in the months ahead decreased slightly from 13.0 percent to 12.2 percent, while those anticipating fewer jobs edged up from 16.3 percent to 17.2 percent,” the report said.

American Investors Turn Gleeful

While consumer confidence is falling, so too is investor confidence around the world. That is the result of a study by State Street, which showed the Investor Confidence Index fell 2.2 points to 106.5 in February.

A significant exception to this is North American investors, who saw an increase in confidence from 108.9 to 109.3 in February. Growing corporate profits in the United States and bolstered monetary policies from a still dovish Federal Reserve, which has publicly calmed fears that another rate hike will come in the short-term, have bolstered the stock market from its yearly lows in the middle of February.

Still, fears globally are taking investors abroad by storm. “The narrative surrounding risk aversion seen so far in 2016 has focused on the weakness of global growth, the risks in China and the knock-on impact of lower energy prices.

However, the regional breakdown of our investor confidence index this month reveals a rather different set of concerns, with confidence rising in Asia but collapsing in Europe,” said State Street’s Global Macro Strategy Senior Managing Director Michael Metcalfe. He added that the trend suggests a change in macroeconomic policy is needed, especially in Europe.