Economy Watch: Consumers Seem Slightly More Wary, But Might Still Spend

The latest downward trend in consumer confidence could have a longer-term impact on their spending—a key consideration for real estate developers and investors.

Consumers are a little more skittish now than during most of last year, and if it lasts, their worry might have have a longer-term impact on such metrics as consumer spending. That’s a key consideration for investors and developers of various kinds of real estate, most notably retail, which is more directly sensitive to consumer moods.

Consumer confidence dropped in early March due to increased concerns about prospects for the economy as well as the expectation that gas prices would inch upward during the year ahead, according to the University of Michigan’s Surveys of Consumers. The fall was from 91.7 at the end of February to 90.0 in mid-March—just the latest in a downward trend.

All of the decline during the past year has been in the Expectations Index, which was due to a weakening outlook for the pace of growth in the national economy. While consumers aren’t anticipating a recession, the survey says, they’re no longer expecting the economy to outperform the 2.4 percent rate of economic growth recorded in the past two years.

In fact, personal financial expectations remained strong in early March, comparable to the favorable levels recorded nearly a decade ago. So it would seem that consumers have gotten their minds around slower economic growth as well as rising gas prices without an accompanying rise in uncertainty about their own situation. Thus the survey data, notes the university, are still consistent with a 2.7 percent rate of growth in personal consumption expenditures during 2016.