Even with the news regarding the sequestration surrounding consumers, new reports show that Americans are actually feeling more confident regarding the economy than in prior months.
According to Bloomberg, the Bloomberg Consumer Comfort Index showed that the gap between positive and negative expectations has been decreasing. The numbers went from negative 7 in February to negative 4 in March, which is the highest levels this year. While still negative, this news suggests that the closing of the gap could eventually lead to more positive feelings than negative ones. The survey asks participants weekly about their feelings regarding the economy, and the highest percentage of respondents – 30 percent – since the beginning of the year feel the economy is improving.
Some economists are crediting this change with the falling unemployment rate, stock market gains and the strengthening housing market, along with other improvements.
"Americans are growing more confident about their own financial and economic situations," said Bloomberg L.P. senior economist Joseph Brusuelas. "A quicker pace of employment growth, a modest wealth effect, and what looks to be a decline in gasoline prices has likely bolstered future expectations on the economy."
As more confidence can often lead to more spending, and in turn, more confidence happens to complete the cycle, there are still reasons to be hesitant. Budget cuts from the sequestration are threatening a number of industries, and the recent effects haven't been experienced quite yet. Regardless, news that consumers are feeling more confident than in the past could help soften the blow from the federal budget changes.
For banks or lenders, this increase in optimism and moving closer to a positive number of confident consumers could also mean an increase in mortgage or other loan applications. With a falling unemployment rate, especially one that has been on the decline for some time, more borrowers are likely to invest in cars and homes. To prepare, banks can invest in loan processing software to continue lending – another tool that will help the market recover.