More lose faith in economy
U.S. consumer confidence fell further into recessionary territory this month, hitting a 16-year low even as other data showed that incomes rose and inflation eased in February, which should support the Federal Reserve’s efforts to bolster the economy.
The Reuters/University of Michigan Surveys of Consumers said its final index of confidence has fallen to 69.5 in March -- its lowest since February 1992, when it was at 68.8 -- from the previous month’s reading of 70.8.
Consumers apparently were unimpressed by February’s 0.5% rise in personal incomes, reported by the Commerce Department. That exceeded forecasts of a 0.3% gain made by analysts polled before the release.
However, the best news from the U.S. personal income report may have been the benign reading on underlying inflation, which was 2%. This matched January’s gain, which was revised downward from 2.2%.
This latest reading on the core personal consumption expenditure price index is also just within the Federal Reserve’s perceived comfort zone.
“It argues that the Fed can lower rates in the months ahead,” Zach Pandl, an economist at Lehman Brothers in New York, said about the core price reading.
Many officials at the Fed, which has cut interest rates by 3 percentage points since mid-September in an attempt to combat recession risk, have said they prefer to keep the core price gauge in a 1% to 2% range.
The Commerce Department’s report also showed signs of economic weakness, with personal spending increasing just 0.1% in February. This was in line with expectations but was down from a 0.4% gain in January.
This weakness was consistent with the Reuters/University of Michigan Surveys of Consumers report, which said that “it is now nearly unanimous among consumers that the economy has already entered a recession.”
Its index of consumer expectations fell to 60.1, its lowest since January 1992, when it was at 59.1. In February this year it was at 62.4.
The report showed that the final reading on one-year inflation expectations jumped to 4.3% this month from 3.6% in February.
That was the highest final reading since October 2005, when gasoline prices were soaring after Hurricane Katrina, but was down from the preliminary March reading of 4.5%.
Excluding the post-Katrina period, the March reading would be the highest since 1990.
The index of consumers’ economic outlook for the next 12 months fell to 46 -- the lowest since a similar reading in January 1991 -- from 54 in February.
“Consumer confidence slipped due to growing concerns about weakening prospects for the economy as well as anticipated increases in unemployment and inflation during the year ahead,” the Reuters/University of Michigan statement said.
