Consumer confidence falls in March

WASHINGTON (AP) ? Americans are less confident in the economy than they were last month as massive government spending cuts have stoked economic uncertainty.

It's just the latest swing in the way Americans feel about the economy. Their views have fluctuated between optimism and angst over the months as they've weighed an advancing stock market and housing recovery against new economic challenges.

"From my standpoint, we're still in a stalled recovery," says Skip Tamke, a central New Jersey project manager for a computer storage company who lost a job last May that paid twice what he's earning now.

The Conference Board, a New York-based private research group, said Tuesday that its Consumer Confidence Index fell in March to 59.7 from a revised reading of 68 in February and the 68.7 that analysts polled by research firm FactSet expected. Confidence is still far off from the 90 reading that indicates a healthy economy.

The index is closely watched by economists because it makes a monthly gauge of how Americans are feeling about their jobs, incomes and other bread-and-butter issues. That's important because consumer spending accounts for 70 percent of U.S. economic activity.

Anxiety about $85 billion in across-the-board government spending cuts that took effect March 1 caused the decline in the index, the group said. The spending reductions, which were triggered after Congress and the White House failed to resolve a budget impasse, have "created uncertainty regarding the economic outlook," Lynn Franco, the Conference Board's director of economic indicators, said in a statement

Congress and the Obama administration reached a deal on Jan. 1 to prevent income taxes from rising on most Americans. But they allowed a temporary cut in Social Security taxes to expire. For a worker earning $50,000 a year, take-home pay will shrink by about $1,000.

That has a more direct impact on most Americans than the government spending reductions, noted Scott Brown, chief economist at investment firm Raymond James.

The March drop in the confidence index "likely reflects the impact of higher gasoline prices as well as the higher payroll tax," Brown said. Although the payroll tax increase kicked in three months ago, its effect may just now be sinking in for some people, he says.

The Conference Board's survey was conducted from March 1 through March 14. The sharp decline in the March index was caused mainly by a drop in expectations for the economy, though consumers also were more pessimistic regarding current economic conditions, the group said. The number of people anticipating more jobs in the months ahead fell to 12.3 percent from 16.1 percent, while those expecting their incomes to increase slipped to 13.7 percent from 15.8 percent.

Consumers also are again pessimistic about the short-term outlook for the economy, the group said. The proportion of people expecting business conditions to improve over the next six months fell to 14.4 percent from 18 percent a month earlier, while those expecting conditions to worsen rose to 18.3 percent from 16.6 percent.

Chris Christopher, director of consumer economics at IHS Global Insight, said he expects consumer confidence to recover as the "shock value" of the mandated spending cuts wanes. However, "smaller paychecks, depressed consumer mood, and rising (gasoline) prices are not very favorable for elevated levels of discretionary spending," Christopher wrote in a research note.

The decline in consumer confidence comes as Americans are seeing some signs of an improving economy.

Stock prices have roughly doubled since June 2009. And the job market, while still tough, is rebounding. Employers added 236,000 jobs in February, driving the unemployment rate down to 7.7 percent, its lowest level in more than four years. The gains signaled that companies are confident enough in the economy to intensify hiring even in the face of tax increases and government spending cuts.

Americans spent more at retailers in February despite the smaller paychecks, according to a Commerce Department report issued on March 13. Much of the increase in retail sales compared with January reflected higher gasoline prices. But even excluding the volatile categories of gas, autos and building supply stores, so-called core retail sales rose strongly.

The healthier-than-expected numbers prompted some experts to revise their estimates of U.S. economic growth for the January-March quarter. And the Conference Board's measure of the U.S. economy's health over the next six months, reported on Thursday, increased in February from January.

But that says little about the current financial reality for Americans like Tamke, the central New Jersey resident. He says he was out of work for over eight months before he found his current position.

"I know I'm not pumping anything into the economy," he says. "I am barely able to pay my bills."

Source: http://news.yahoo.com/consumer-confidence-falls-march-142231567--finance.html

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