Consumer Sentiment Falls in March as Optimism Slips
Consumer confidence declined in March to the lowest level in four months, a sign U.S. households will be slow to increase their spending.
The Thomson Reuters/University of Michigan final index of sentiment fell to 80 from 81.6 in February. The median projection in a Bloomberg survey of economists called for 80.5 after a preliminary March reading of 79.9.
Americans grew more pessimistic about the outlook for the economy as higher home-heating bills and gasoline prices strained budgets. Stronger job and wage gains would help brighten outlooks and provide a bigger push for the consumer spending that accounts from almost 70 percent of the economy.
"Right now there's a lot of uncertainty around the economy," Stephen Stanley, chief economist at Pierpont Securities in Stamford, Conn., said before the report. "The data has been a bit disappointing, but at the same time you've had the whole weather distortion story and no one really knows whether things are doing better on an underlying basis or not."
Estimates of the 63 economists in the Bloomberg survey ranged from 79.5 to 83. The index averaged 89 in the five years before December 2007, when the last recession began, and 64.2 in the 18-month contraction that followed.
The Michigan sentiment survey's index of expectations six months from now decreased to 70 from 72.7 last month. The preliminary reading was 69.4. The gauge of current conditions, which measures Americans' view of their personal finances, rose to 95.7 in March from 95.4 a month earlier. The initial figure was 96.1.
Another report Friday showed consumer spending in February increased the most in three months as incomes picked up. Household purchases advanced 0.3 percent after a 0.2 percent gain, the Commerce Department said. %VIRTUAL-article-sponsoredlinks%Incomes also rose 0.3 percent.
The economy expanded at a 2.6 percent annualized rate in the fourth quarter, more than previously estimated, as consumer spending, which makes up about 70 percent the economy, rose by the most in three years. The gain reflected a bigger increase in outlays for health care.
Other recent measures of sentiment have been mixed. The Conference Board's confidence index climbed in March to the highest level in six years. The Bloomberg Consumer Comfort Index declined to the lowest level in seven weeks as all three components of the gauge declined.
Further progress in the job market may help propel consumer sentiment and encourage purchasing. Jobless claims declined by 10,000 to 311,000 last week, the fewest since late November and a sign employers may boost hiring when demand picks up, Labor Department data showed yesterday.
Payrolls expanded by 175,000 workers in February after a 129,000 gain in the prior month, the Labor Department reported March 7. Employment is projected to climb 195,000 in March, according to the Bloomberg survey median before next week's jobs release.
Worker pay is also showing signs of picking up. Disposable income, or the money left over after taxes, rose 0.3 percent after adjusting for inflation, the most since September. It climbed 2.1 percent from February of last year, Friday's Commerce Department figures showed.
Rising incomes help explain a pickup in spending after bad weather caused some Americans to pull back. Retail sales rose in February for the first time in three months, Commerce Department data on March 13 showed.
The severe winter weather has made it difficult to detect underlying consumer trends, said Karen Hoguet, chief financial officer at Macy's (M). The department-store chain posted revenue of $9.2 billion for the quarter ended January, compared with $9.35 billion in the same period a year ago.
"We've had such up and down weather that it's a little bit harder to know what's weather, what's the consumer, what's really happening," Hoguet said on a March 25 conference call. Even so, "I don't think I would say that the consumer is overwhelmingly excited about spending."