Consumer Sentiment Stumbles Again


U.S. consumer sentiment unexpectedly fell in March for the second straight month, capping off a mixed week for the nation's economy, with both initial jobless claims and the trade deficit coming in lower-than-expected, and retail sales rising despite February's snow storms.

The Reuters/University of Michigan Surveys of Consumers said its consumer sentiment index for March (preliminary) fell to 72.5 from 73.6 in February (final), Reuters reported Friday.

A Bloomberg News economists survey had expected the index to rise to 74.0 in March (preliminary). The index was at 74.4 in January, 72.5 in December, and 66.0 in November. The index hit a cycle low of 55.3 in November 2008, and the index's record low of 51.7 was set in May 1980.

Other IndicatorsAlso Fall

In addition, the index of consumer expectations fell to 67.2 in March from 68.4 in February, while the current conditions index declined to 80.8 from 81.8, Reuters reported.

Meanwhile, the one-year inflation expectations index rose to 2.8% in March from 2.7% in February; the five-year inflation expectations index was unchanged at 2.7%.

Richard Curtin, director of the surveys, said concern about current economic policies is weighing on consumers' minds. "In recent months there has been a noticeable loss of confidence in current economic policies," Curtin said in a statement, according to Reuters.

Investors should pay attention to consumer sentiment because it usually precedes consumer decisions to buy (rising sentiment) or hold off purchases (falling sentiment) -- and historically consumer spending has accounted for the bulk (65% to 70%) of U.S. GDP.

The University of Michigan's Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy.

As the nation approaches spring, consumer sentiment remains substantially above levels recorded a year ago, but its recent pulse has been low. Consumers realize that economic conditions are improving for companies, but they're not expressing any more confidence in their personal situation, or regarding the economy's ability to lower the unemployment rate. Until that sentiment improves, it will constrain consumer spending, which historically has walked hand-in-hand with positive sentiment.

Originally published