Consumer confidence continues to be strong in retail sector

As the 2018 Retail Supply Chain Conference concludes this week in Phoenix, leading industry indicators point to continued consumer confidence.

“The Conference Board's consumer confidence index unexpectedly surged 6.5 points (5.2%) to 130.8, the highest level since November 2000,” said James Bohnaker, Associate Director, U.S. Macro & Consumer Economics, IHS Markit.

He added that the gain in confidence was driven by improvement in consumers’ views of both the present situation and expectations. 

“The labor index (percentage of respondents who think that jobs are plentiful minus the percentage who think jobs are hard to get) increased 3.8 points to 24.7%. The percentage of respondents expecting higher income six months from now rose 3.2 points to 23.8%. Both were the best since 2001, consistent with the tight labor market with unemployment at 4.1% and likely headed lower,” he said.

According to Bohnaker, many consumers started seeing additional money in their paychecks this month, so the rise in confidence is no surprise. Sustained improvement in income growth—due to more hiring, wage gains, and the tax cuts—will keep confidence elevated over the next couple years.

“Recent financial market volatility was resolved early in February, so that was likely brushed off by most respondents. However, a return to more frequent episodes of market turbulence could cause some swings in confidence,” he said.

Analysts maintain that The boost in consumer confidence is supportive of IHS Markit’s  February real consumer spending growth forecast of 0.3%.

Naveen Jaggi, President of Retail and Capital Markets for JLL, told Logistics Management that this confidence has industrial real estate implications for shippers.

“Strength in labor market and the recent tax cuts propelled consumers to remain positive, despite the recent volatility of the financial markets,” he said. “This bodes well for retailers as most consumers found extra discretionary income in their pay checks.

Jaggi also noted that the recent market volatility would only potentially impact the luxury sector as those consumers have more income tied up in the markets.

“There would need to be sustained periods of negative news coming from the markets to impact most retail sectors,” he said.