Confidence among US consumers unexpectedly declined for a second month in March, a sign Americans are discouraged about the labor market.
The Reuters/University of Michigan preliminary consumer sentiment index fell to 72.5 from February's final reading of 73.6. Economists surveyed by Bloomberg News projected the gauge would increase to 74, according to the median estimate.
Gains in confidence that may encourage Americans to pick up the pace of spending depend on payroll growth after the loss of 8.4 million jobs the last two years. Retail sales unexpectedly increased last month, a separate report from the Commerce Department showed today.
``Sentiment will gradually work higher as the economy improves and it becomes clear to people that the labor market is no longer getting worse and is gradually getting better,'' Robert Stein, a senior economist at First Trust Portfolios LP in Wheaton, Illinois, said before the report. The recovery ``won't feel quite as good because we're not going to be spending as much as we have in the past.''
Estimates for the March index ranged from 71 to 78 in a Bloomberg News survey. The measure averaged 88.8 during the economic expansion that ended in December 2007. The gauge averaged 66.3 last year and 63.8 in 2008.
A measure of current conditions, which reflects Americans' perceptions of their own finances, fell to 80.8 this month, the lowest since December, from 81.8 in February.
Higher stock prices did little to boost sentiment. The Standard & Poor's 500 Index has risen 8.8 per cent since reaching a three-month low on Feb. 8 through yesterday. So far in March, the S&P is up about 4 per cent.
Consumer expectations
The index of expectations six months from now, which projects the direction of consumer spending, declined to 67.2, the lowest level since November, from 68.4 last month.
Retail sales increased 0.3 per cent in February, according to the Commerce Department in Washington. While stronger than the 0.2 per cent decrease projected by economists in a Bloomberg survey, figures for the prior two months were revised down.
An absence of job growth and few signs of inflation are reasons Federal Reserve policy makers will keep interest rates near zero when they meet next week, according to the median estimate in a Bloomberg survey.
Inflation outlook
Consumers in the Michigan survey said they expect an inflation rate of 2.8 per cent over the next 12 months, compared with 2.7 per cent projected for February. Over the next five years, the figure tracked by central bankers, Americans expected a 2.7 per cent rate of inflation, matching the figure in last month's survey.
Fed policy makers are scheduled to meet March 16 to discuss the direction of the benchmark overnight lending rate between banks. Fed presidents in recent weeks have repeated a pledge to keep interest rates low until the recovery picks up.
``With the unemployment rate at 9.7 per cent and inflation significantly under my benchmark for price stability, there is no conflict between our policy goals,'' Federal Reserve Bank of Chicago President Charles Evans said in a March 9 speech in Arlington, Virginia. ``This accommodation will likely be appropriate for some time.''
The impetus for improvement in Americans' outlooks and willingness to spend will likely come from the labor market, and employers may be on the cusp of adding jobs. Payrolls fell a less-than-forecast 36,000 in February, Labor Department figures showed March 5.
Job creation has to be the top priority for the US, Coca- Cola Co. Chief Executive Officer Muhtar Kent said in an interview March 4.
``The consumer is still confused,'' he said. ``For durable consumer goods there's no question, there is a reset in the minds of consumers.''
