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Business & Technology

Consumer confidence declines more than expected in March

March 27th, 2007 11:57 pm by Associated Press



NEW YORK - Consumers sent up a warning signal in March that rising gas prices, falling home values and a volatile stock market could hurt spending in the coming months, a widely watched index showed on Tuesday.


The New York-based Conference Board said that its Consumer Confidence Index fell to 107.2, down from the revised 111.2 in February. Analysts had expected a reading of 109. The March index was the lowest since November 2006 when the reading was 105.3.


"Apprehension about the short-term future has suddenly cast a cloud over consumers' confidence," Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement.


"The recent turmoil in financial markets coupled with the run-up in gasoline prices may have contributed to consumers' heightened sense of uncertainty and concern. The direction of both components over the next few months bears watching to determine whether this decline is just a bump in the road or something more substantial," she added.


Economists closely monitor consumer confidence because consumer spending accounts for two-thirds of all U.S. economic activity. Confidence had been climbing, helped by consumers' faith in the job market.


The Present Situation Index, which measures how shoppers feel now about economic conditions, increased slightly to 137.6 from 137.1 in February. The Expectations Index, which measures consumers' outlook in the next six months, declined to 86.9 from 93.8.


Joel Naroff, president of Naroff Economic Advisors, said that a one-month dip in consumer confidence after a four-month climb doesn't mean that shoppers are suddenly going to stop spending, but he said it is a "warning sign."


"Everything is consistent on the uncertainty," Naroff said, noting that if consumers are questioning what is going on, they are also going to be questioning their future purchases.


The Conference Board report - derived from responses through March 21 - showed increasing anxiety about the stock market and inflation. Those expecting the stock market over the next 12 months to decline increased to 30.7 percent, from 16.7 percent in February. Those expecting the stock market to increase fell to 29.3 percent from 39.9 percent.


Meanwhile, the report also showed that consumers expect the inflation rate on the goods they buy to increase by an average rate of 4.9 percent over the next 12 months, up from 4.6 percent in February. Franco noted that such a spike usually is consistent with a jump in gas prices.


The Conference Board report was a bit sobering for retailers and other businesses that rely on consumer spending.


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