Waning Confidence

March Consumer Confidence: -8.3.  Consumer confidence vanished; falling through expectations (66.9) to 59.7 while February’s reading was also revised 1.6 points lower.  A shot across the strengthening economy’s bow, this report suggests that consumers are not as resilient to higher gas prices, pay-roll tax increases or sequestration uncertainty as initially expected.  Consumer spending has accelerated this year as consumers became more confortable with the economy, increasing household wealth and surging stocks prices.  This drop erases January’s gain and brings the report just points away from a 2-year low.  Within the report, a steep decline in consumer expectations accounted for most of the headline drop, as consumer’s income, employment and business outlook worsened.  Nevertheless current conditions also weakened, as the net amount saying business conditions are good dropped while the net amount saying jobs are hard to get increased.

This drop was not without warning, as the past 2 weekly Bloomberg Consumer Sentiment reports (see March 14 & 21) declined while the University of Michigan Sentiment gauge (See March 15) took its largest dive since 2011.  A fundamental shift in confidence is at root, threatening this year’s strengthening economic growth.

  • Present Situation:                                           57.9           -3.5
  • Expectations:                                                 60.9           -11.5
  • 1 Year inflation Expectations:                        5.5%*        -.2%     *lowest since July