WASHINGTON -- U.S. consumer sentiment weakened in early March as an unusually harsh winter appeared to dim views on the economy's prospects.
The preliminary Thomson Reuters/University of Michigan index of consumer sentiment fell to 79.9 in March from 81.6 the prior month, a survey showed Friday.
Analysts had expected sentiment to improve, and the weak tone of the report could be a sign that severe weather had put consumers in the doldrums. That would back the view that the U.S. economy was only temporarily stuck in a soft patch and would resume stronger growth once the weather improves.
"Most of the decline ... can be attributed to the unseasonably bad weather," said Amna Asaf, an economist at Capital Economics in Toronto.
Parts of the United States have suffered colder-than-normal temperatures and blizzards over the winter, which may have contributed to several months of weak hiring.
If weather is the culprit, then the Federal Reserve can feel more confident about continuing the winding down of a bond-buying stimulus program. The Fed started trimming monthly bond purchases in January.
The sentiment index was at its lowest level since November. It was largely dragged down by a drop in consumer expectations for future growth. There were some signs of strength in the report. Those polled expected the highest rate of annual income gains since November 2008.
"Expectations of income gains were ... consistent with a tightening labor market," %VIRTUAL-article-sponsoredlinks%said Cooper Howes, an economist at Barclays Capital in New York.
A separate report from the Labor Department pointed in the opposite direction with regard to inflation, as a decline in U.S. producer prices in February suggested little building of inflationary pressure.
The government's seasonally adjusted producer price index for final demand dropped 0.1 percent last month. On its own, the price data would make policymakers feel more comfortable holding interest rates near zero for many more months.
"There is nothing in this report that raises any concerns about inflation," said John Canally, economist and investment strategist at LPL Financial in Boston. "The economy is running too far below capacity for that to happen.
U.S. inflation has held at a very low level in recent years because of a persistently high unemployment rate.
The value of the U.S. dollar slipped against the yen following the price data's publication, suggesting investors felt the report buttressed the view that the Fed would hold interest rates extremely low into next year.
Prices for U.S. stocks and yields on U.S. government debt fell on heightened tensions over a possible U.S.-European response against Russia if a referendum in Ukraine's Crimea region goes ahead.
Analysts polled by Reuters had forecast a slight increase in prices received last month by businesses such as factories, retailers and wholesalers. The price index had risen 0.2 percent in January.
Final demand for goods rose 0.4 percent in February. Final demand for services dropped 0.3 percent. The Labor Department said about 80 percent of the decline in its services index was due to lower margins for retailers of apparel, footwear and accessories.
In the 12 months through February, producer prices increased 0.9 percent, the smallest one-year gain since May 2013.
Producer prices excluding volatile food and energy costs fell 0.2 percent. Another gauge of core producer prices -- final demand less foods, energy, and trade services -- nudged up 0.1 percent.
9 Numbers That'll Tell You How the Economy's Really Doing
Consumer Sentiment Edges Lower in March
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.