Consumer Confidence Ebbs Only Slightly

Consumer confidence dipped in March after hitting a 30-year high in February but remained strong enough to suggest further solid economic growth ahead, a report showed Tuesday.

The Conference Board’s consumer confidence index fell to 134.3 during March from 137.4 in February. Separately, the National Assn. of Purchasing Management in Chicago reported that its monthly index of regional manufacturing activity unexpectedly rose to 59.5 in March from 57.8 in February.

“These numbers are still remarkable,” said Kathleen Stephansen, economist at Donaldson, Lufkin & Jenrette Securities Corp. in New York. “The expectation is that income will continue and buying plans will hold up.”

With inflation absent from the U.S. economy, the Federal Reserve Board’s policymakers, during a meeting Tuesday, held the overnight bank lending rate steady at 5.50%, as expected. The Fed’s policy-setting Open Market Committee hasn’t changed borrowing costs for more than a year.

Adding to the evidence that prices aren’t threatening to accelerate, the Chicago purchasing managers reported that the index of prices paid by factories for materials fell to 48.7 in March from 55.5 in February, indicating more companies reported price declines than increases.

A separate Conference Board index measuring consumer expectations for the next six months fell to 108.6 in March from a revised 114.5 during February. Still, March’s overall index was almost 16 points higher than it was in March 1997. February’s index reading was the highest since June 1969.

“There are no signs of any significant downturn in optimism,” said Lynn Franco, a Conference Board economist.

The consumer confidence index, calculated since 1985 from a base of 100, is derived from responses to questions sent to 5,000 households nationwide. The survey polls consumers on matters ranging from job availability to home-buying plans.

U.S. consumers are flush with cash given steady income growth, tax refunds and a resilient stock market. Personal income rose 0.6% in February after a 0.6% increase a month earlier, the Commerce Department said last week.

As confidence rises, so does retailer activity. Apparel stores such as Gap Inc., Talbots Inc. and Limited Inc., which introduced their lines of spring clothing, showed significant sales strength. Sales at discount stores such as Wal-Mart Stores Inc. also rose more than expected during February.

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Consumer Confidence

From a monthly survey of 5,000 U.S. households. Index; 1985=100

March: 134.3

Source: Conference Board