- Consumer Sentiment Index forecast for small change at 78.5.
- Payrolls were much better than expected in January and February.
- Lingering layoffs may be countered by stimulus optimism.
- Dollar trading on US yields and economic data.
Americans have yet to regain their official optimism. January's burst of consumer spending was not accompanied by an improved outlook and attitudes in February slipped to their lowest reading since August.
The Michigan Consumer Sentiment Index is expected to rise to 78.5 in March from 76.8 in February. Sentiment indexes have not recovered from the fall and winter pandemic wave that locked down California, restarted restrictions in other states and reversed several months of gains in layoffs and hiring.
Employment is the most important ingredient in consumer sentiment.
Payrolls were much stronger than initially reported in January and more than double the expectation for February. The improvement was not evident until the payrolls report on March 5. Analysts estimates for weak March Michigan Consumer Sentiment were based on the prior reading of the labor market.
It remains to be seen if consumers on the job lines in February and March sensed their rising employment prospects.
Nonfarm Payrolls, Initial jobless Claims and Consumer Sentiment
The fall wave of the pandemic crushed the recovering US labor market. Nonfarm payrolls fell from an addition of 336,000 in November to a loss on 227,000 in December (initially -140,000) and January first reported just 49,000 new positions.
Initial Jobless Claims jumped from 711,000 in the first week of November, the lowest of the pandemic, to 926,000 two months later. The job reversal was immediately reflected in the sentiment scores.
Initial Jobless Claims
Consumer Sentiment backed from its pandemic high of 81.8 in October to 76.8 in November and remained stalled through February.
The revised payroll numbers for January of 166,000 and February's surprise gain of 379,000, twice the 182,000 consensus forecast, which were the actual job prospects encountered by consumers, did not prompt any improvement in the February sentiment numbers.
FXStreet
Retail Sales, stimulus and the waning of the pandemic
January' wholly unexpected 5.3% burst of Retail Sales is credited by analysts to the December $600 stimulus payment. Sales are forecast to fall 0.4% in February.
Retail Sales
It is, however, at least as likely that the jump in consumption had more to do with the waning of the pandemic, evident in the final weeks of the month, the improving job market and the surety of another much larger stimulus payment in March. These developments and the end of almost all economic restrictions, promise a quickly reviving economy and better times ahead.
Conclusion
Economic turning points are the most difficult to foresee.
January's Retail Sales indicated that where it counts most, in behavior, Americans seem ready to resume their traditional role of avid consumers. After the misery and deferments of the pandemic year, it should not take a great deal of encouragement to bring families back to their normal life.
An improved outlook from Americans is a key component of the US recovery. Treasury yields and the the dollar will rise with consumer optimism.
To paraphrase, Happy Consumer, Happy Economy.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD steady below 1.0800 after US PCE meets expectations
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair barely reacted to US PCE inflation data, with the Greenback shedding some pips. Fed Chair Jerome Powell set to speak ahead of the weekly close.
GBP/USD hovers around 1.2620 in dull trading
GBP/USD trades sideways above 1.2600 amid a widespread holiday restraining action across financial markets. Investors took a long weekend ahead of critical United States employment data next week. Fed Chair Powell coming up next.
Gold price sits at all-time highs above $2,230
Gold price holds near a fresh all-time high at $2,236 in thinned trading amid the Easter Holiday. Most major world markets remain closed, although the United States published core PCE inflation, the Federal Reserve’s favorite inflation gauge.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.