NEW YORK — Rising prices at the gas pump and in grocery aisles are starting to crimp shoppers’ outlook.
The Conference Board’s Consumer Confidence Index fell sharply from a three-year high in February, reversing five straight months of improvement.
The decline raises questions about Americans’ ability and willingness to spend in coming months.
The index fell more than expected to 63.4 from a revised 72.0 in February. Economists expected 65.4, according to FactSet.
The drop was the steepest since the 10.1-point plunge from January 2010 to February 2010, when the U.S. stock market was hammered by worries about Greece’s national debt.
“Rising food and gasoline prices are starting to take their toll on the consumer psyche, and Japan’s triple calamity — earthquake, tsunami and nuclear disaster — has been very unsettling,” said Chris Christopher Jr., senior principal economist at HIS Global Insight.
The index measures how Americans feel about business conditions, the job market and the next six months.
It has hovered in a tight range from the high 50s to low 60s over the past year, far below the 90 that indicates a healthy economy. The index hasn’t approached that level since the recession began in December 2007.
A housing slump that isn’t over and won’t be for a while isn’t helping.
Home prices are falling in most major U.S. cities, and the average prices in four of them are at their lowest in 11 years, according to Standard & Poor’s/Case-Shiller report released Tuesday. On Friday, the Commerce Department said new-home sales plunged in February, the third month in a row.
The falling Consumer Confidence Index is in line with Gallup Poll’s weekly surveys, which have registered a slide in confidence since mid-February.
Economists monitor confidence because consumer spending, including big-ticket items such as housing and health care, accounts for about 70 percent of U.S. economic activity and is critical for a strong rebound.
“Consumers’ inflation expectations rose significantly in March and their income expectations soured, a combination that will likely impact spending decisions,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement.
Signs of financial strain emerged Monday in February’s consumer spending report, which showed that most of the 0.7 percent jump in spending went to cover higher gas prices.
The government’s February jobs report, released this month, showed companies added more workers in February than in any month in almost a year. Unemployment fell to 8.9 percent, the lowest in almost two years.
But higher oil prices, violence in the Middle East and North Africa and Japan’s nuclear crisis could frighten U.S. companies out of taking any risks, says Mark Vitner, a senior economist with Wells Fargo.
As for consumer spending, analysts say March has been uneven after strong holiday spending continued into January and February.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
