Instant View: Consumer confidence falls in March
U.S. consumer confidence fell in March after hitting a three-year high in the prior month as expectations about jobs and income growth worsened, according to a private sector report released on Tuesday.
KEY POINTS: * The Conference Board, an industry group, said its index of consumer attitudes fell to 63.4 in March from a revised 72.0 in February. The median of forecasts from analysts polled by Reuters was for a reading of 65.0. Forecasts ranged from 55.0 to 72.0. * The expectations index slipped to 81.1 from 97.5, while consumers' expectations for inflation in the coming 12 months hit its highest level since October 2008. * The present situation index rose to 36.9 from 33.8. Consumers' labor market assessment worsened. The jobs hard to get index rose to 44.6 percent from 44.4 percent the month before, while the jobs plentiful index slipped to 4.4 percent from 4.9 percent.
COMMENTS:
CARY LEAHEY, MANAGING DIRECTOR AND SENIOR ECONOMIST, DECISION ECONOMICS, NEW YORK:
The Conference Board's consumer confidence index was worse than expected. Most people were looking for a five-point decline and you ended up with a seven-point decline. This basically takes the index back to where it was in December. It's making a similar move to the Reuters/(University of) Michigan index which has already been released.
We don't know why it fell because this report does not have the texture of the (Reuters/UMich report) but the obvious suspects are an increase in uncertainty capped by the rise in oil prices, nervousness about Japan, and finally and most importantly in this index, though we only know this implicitly, people know there are fewer layoffs, but there haven't been a lot of jobs created.
The view of the job situation declined a bit. The number of people who thought there were more jobs out there went down. Perceptions about the job market are what usually drive this report.
This kind of report makes you wonder why certain members of the FOMC think they can turn off QE2 before it is set to end in June. The big story in the last week was the signs that some Fed officials were turning a little more hawkish, exemplified by (St. Louis Federal Reserve President James) Bullard. Perhaps Mr. Bullard may want to reconsider those remarks in light of reports like these.
The one-year consumer inflation expectations reflect the experience at the gas pump. The average American gets whipsawed by gasoline prices.
VASSILI SEREBRIAKOV, SENIOR CURRENCY STRATEGIST, WELLS FARGO, NEW YORK:
The economy is still recovering from a substantial crisis. You've got some indicators pointing to faster growth but there are still areas of weakness, especially housing. As far as consumer confidence, it all hangs on how long the Mideast unrest will last and how high oil prices will go. The good news is that despite all the negative news headlines, equity markets have been tremendously resilient, so that will help confidence going forward.
STEVE GOLDMAN, MARKET STRATEGIST, WEEDEN & CO., GREENWICH, CONNECTICUT:
We do know it's sluggish and there are concerns, and stocks have reflected that in the past month as well. We've seen sluggish consumer confidence in the early 90s, and markets continued to rally higher, so there was an elongated bottoming there. So today's data is probably not going to have much (impact).
KING LIP, CHIEF INVESTMENT OFFICER, BAKER AVENUE ASSET MANAGEMENT, SAN FRANCISCO
This is pretty much what we expected. It isn't too surprising to see hiccups, given the rise in gas and food prices, and because of that this shouldn't really be viewed as a big tradable event.
CHRISTOPHER LOW, CHIEF ECONOMIST, FTN FINANCIAL, NEW YORK
It's all expectations too--that's something. It looks like there was some pretty significant deterioration in people's future expectations of business conditions, the employment situation and deterioration for people's expectations for income too. It's interesting though that current conditions held up really well. So people are not seeing an immediate weakening in the economy; they're anticipating something. Similar deterioration in the University of Michigan sentiment numbers, yesterday we saw February consumer spending, the nominal increase was large. Adjusted for inflation it was only up three-tenths. Already people were beginning to cut back in reaction to the rise in oil prices but the biggest increase in gas prices occurred in March.
It suggests to me that consumer spending is already tracking at about half the rate of growth in the first quarter as it did in the fourth quarter so already the economy is slowing down. I would expect an even sharper slowdown in the second quarter.
DAVID SLOAN, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS:
The Conference Board's relative resilience is explained by a rise in its present situation index to 36.9 from 33.8, reaching its highest since November 2008. Expectations slipped sharply to 81.1 from 97.5, hit by a surge in inflation expectations. The message is that the recovery maintains momentum in March, but if gasoline prices remain high, that may be undermined.
SEAN INCREMONA, ECONOMIST, 4CAST LTD, NEW YORK
It's a very sharp drop from February, consumer attitudes for the economy in general really took a step back in March. It could be a headwind for spending going forward.
Michigan already came out soft, so this should limit the market impact. This sharp March contraction might be a one-off thing, but it does seem to look we have reached a top in the near term.
MARKET REACTION: STOCKS: U.S. stock indexes were little changed BONDS: U.S. bond prices were mostly stable FOREX: The dollar fell slightly against the euro
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