With across-the-board government spending cuts creating uncertainty regarding the economic outlook, the Conference Board released a report on Tuesday showing a notable deterioration in U.S. consumer confidence in the month of March.
The Conference Board said its consumer confidence index fell to 59.7 in March from a revised 68.0 in February. Economists had expected the index to dip to 67.5 from the 69.6 originally reported for the previous month.
Lynn Franco, Director of Economic Indicators at the Conference Board, said, "This month's retreat was driven primarily by a sharp decline in expectations, although consumers were also more pessimistic in their assessment of current conditions."
"The loss of confidence, particularly expectations, mirrors the losses experienced this past December and January," she added. "The recent sequester has created uncertainty regarding the economic outlook and as a result, consumers are less confident."
The report showed a notable decrease by the expectations index, which tumbled to 60.9 in March from 72.4 in February.
The drop came as consumers expecting business conditions to improve over the next six months fell to 14.4 percent in March from 18.0 percent in February, while those expecting conditions to worsen rose to 18.3 percent from 16.6 percent.
Consumers were also more pessimistic about the outlook for the labor market, as those expecting more jobs in the months ahead dropped to 12.3 percent from 16.1 percent, while those expecting fewer jobs increased to 26.6 percent from 22.1 percent.
Additionally, the Conference Board said the proportion of consumers expecting their incomes to increase fell to 13.7 percent from 15.8 percent, while those expecting their incomes to decrease edged down to 18.0 percent from 19.3 percent.
The report also showed that the present situation index dipped to 57.9 in March from 61.4 in February, reflecting a drop in consumers' assessment of current conditions.
Consumers saying business conditions are "good" fell to 16.0 percent from 17.6 percent, while those saying conditions are "bad" rose to 29.3 percent from 28.2 percent.
The Conference Board also said consumers saying jobs are "plentiful" decreased to 9.4 percent from 10.1 percent, but those saying jobs are "hard to get" edged down to 36.2 percent from 36.9 percent.
Amna Asaf, an economist at Capital Economics, said, "Overall, the sharp drop in sentiment, which shows up in most of the main measures, is a concern."
"But confidence has proven to be a particularly poor indicator of actual spending in recent years," she added. "Moreover, with gasoline prices falling, labor market conditions improving and stock markets hanging on to recent gains, we would expect confidence to rebound."
Friday morning, Thomson Reuters and the University of Michigan are scheduled to release their final report on consumer sentiment in the month of March.
Economists expect the consumer sentiment index to be upwardly revised to 72.5 from the mid-month reading of 71.8. The index came in at 77.6 in February.
by RTT Staff Writer
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