Consumer Outlook Weakens in Early March

ANN ARBOR, Mich. — U.S. consumer sentiment slipped in early March as rising gasoline prices and economic uncertainty weighed on households, according to preliminary results released Friday by the University of Michigan Surveys of Consumers.

The survey’s Index of Consumer Sentiment fell to 55.5 in March, down from 56.6 in February, marking a roughly 2% monthly decline and the lowest reading so far this year.

Economists and policymakers watch the sentiment survey closely because shifts in household outlook can influence consumer spending and expectations for inflation, which are key factors in the Federal Reserve’s interest rate decisions. The Fed is scheduled to meet this week to assess inflation trends and decide whether to adjust interest rates.

The decline came after a brief improvement earlier in the survey period that was erased following the start of U.S. military action in Iran and the resulting spike in gasoline prices. Interviews for the report were conducted between Feb. 17 and March 9.

“Interviews completed prior to the military action in Iran showed an improvement in sentiment from last month, but lower readings seen during the nine days thereafter completely erased those initial gains,” said Joanne Hsu, director of the Surveys of Consumers.

The survey showed mixed signals within the broader sentiment index. The gauge of current economic conditions rose to 57.8 from 56.6, suggesting households see the present economy as relatively stable. However, the index of consumer expectations fell to 54.1, reflecting growing concern about the months ahead.

Inflation expectations also remained elevated. Consumers expect prices to rise 3.4% over the next year, unchanged from February and still above the roughly 2.3%–3.0% range common before the pandemic. Long-term inflation expectations edged down slightly to 3.2%.

The survey’s final March results are scheduled to be released March 27.

Source: University of Michigan Surveys of Consumers

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