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BY NIV ELIS
Source: thehill.com, March 2021
Consumer sentiment in early March rose to its highest point level since the pandemic began a year ago, signaling optimism among Americans as the economic recovery starts to take hold.
The University of Michigan consumer sentiment index, released Friday, rose 8.1 points to 83, the strongest showing since the coronavirus prompted lockdowns nationwide.
The most recent reading comes amid a ramp-up in vaccinations and passage of the $1.9 trillion COVID-19 relief bill that includes $1,400 stimulus checks for most Americans.
“The gains were widespread across all socioeconomic subgroups and all regions, although the largest monthly gains were concentrated among households in the bottom third of the income distribution as well as those aged 55 or older,” said Richard Curtin, the survey’s chief economist.
Still, the survey indicated that consumers felt their own financial situations were not improving, even if they believed the broader economy was.
“The best news for the economy is consumers expect to spend most in the service sector, the hardest-hit part of the economy,” said Robert Frick, corporate economist at Navy Federal Credit Union, after the survey results came out.
“The pent-up demand for services that have been unavailable, combined with pent-up savings, should provide a major boost to employment and GDP.”
The amount of consumer spending on the horizon has some economists warning about inflation risks.
“Inflation expectations for the year ahead remained elevated, but consumers thought the inflation rate would fall back to lower levels over the longer term,” Curtin said.
That view is in line with recent comments made by Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell.
If inflation takes hold in a more meaningful way, however, it could lead to higher interest rates and a slowing recovery.
Yields on 10-year Treasury bonds jumped to their highest level in a year on Friday, reaching 1.62, a sign that bond traders may expect inflation.
