March 30, 2005--The dip in the Consumer Confidence Index in March will have very little impact on business growth because of a buoyant labor market and increased business spending, said the National Federation of Independent Businesses (NFIB).
"The drop is not very large and we think consumers are happy about the job market. There are signals that spending will continue at the same pace and that businesses will see no change in the number of customers through their doors," said William C. Dunkelberg, chief economist at the NFIB.
The Conference Board's Consumer Confidence Index for March stood at 102.4, down from 104.4 in February. The index is based on a sample of 5,000 U.S. households, and is a monthly survey. The weakening confidence levels are the result of an increase in gas prices and the rise in unemployment claims, said Lynn Franco, Director of The Conference Board's Consumer Research Center.
Consumer assessment of the overall business conditions was mixed. 25.8% of consumers said overall business conditions are "good," up from 24.6% last month, but those claiming conditions are "bad" also increased slightly to 16% from 15.7%.
The NFIB has said that it expects business spending to reach double-digit rates and be stronger compared to consumer spending.
"Our surveys showed that in February more firms reported that sales are rising and profits are looking good. So not much in the consumer confidence report worries me," said Dunkelberg.
In the Conference Board's survey, consumers weighed in on their perception of the condition of the labor market. Consumers saying jobs are "hard to get" rose to 23.8% from 22.4%, while those claiming jobs are "plentiful" improved to 21.3% from 21.1%.
In the coming months, those expecting more jobs to become available remained unchanged at 15.1%, while those expecting fewer jobs declined to 15.8% from 16.5%. The proportion of consumers anticipating their incomes to improve in the months ahead edged down to 16.7% from 18.7% last month.
Consumer spending accounts for 70% of the GDP and is seen as an indicator of the economy's growth.