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Confidence Among U.S. Consumers Falls to Three-Month Low

Confidence Among U.S. Consumers Falls to Three-Month Low

2011-03-29 13:45:00
Christopher Vecchio, CFA, Sr. Currency Strategist
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Consumer confidence in the United States fell to a three-month low in March, according to the Conference Board’s confidence index released today. Sentiment appears to have fallen on rising energy costs, which has propelled oil to its highest level in more than two years. Sentiment could remain lower for some time amid growing geopolitical concerns and uncertainty over the direction of the U.S. economy: the rising tensions in the Middle East and North Africa could support a higher oil price, while a sliding housing market, as noted by the S&P/Case-Schiller house price index which dropped to 140.86 in January, suggests that the economy could be entering the second leg of the ‘great recession.’ The rising underlying inflationary pressures could also contribute to the suppression of consumer confidence going forward, as Americans’ inflation expectations for the next 12-months jumped to 6.7 percent in March, the highest reading since October 2008.

The index fell to a three-month low at 63.4 in March, from a 72.0 reading in February. According to a Bloomberg News survey, the median estimate placed confidence at 65.0. Similarly, estimates for the survey ranged from 59.0 to 73.5. The Conference Board’s measure of present conditions jumped to 36.9 from 33.8 in February, the highest such reading since November 2008. The increase represents a 15.1 percent rally, with the current business conditions component being rated, on average, as “good,” by survey takers. Consumers appear to be losing confidence in the labor market, with the reading on ‘job availability’ falling to 4.4 percent from 4.9 percent; those who said jobs were ‘hard to obtain’ remain unchanged at 44.6 percent from February to March. In total, despite the positive reading for current conditions, it was the assessment of the near-term that dragged down the overall reading. The gauge of expectations for the next 6-months fell from 97.5 in February to 81.1 in March, with fewer Americans planning on buying fewer durable goods over this time frame.

In the wake of the news, the Dollar Index slipped slightly after gaining through the overnight. Within the hour before the consumer confidence report, it was as high as 76.43, though fell as low as 76.21 in the minutes after, at the time this report was written.

Written by Christopher Vecchio, DailyFX Research.

To contact the author of this report, please send inquiries to: research@dailyfx.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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