March Consumer Sentiment Falls to 4-Month Low

March Consumer Sentiment Falls to 4-Month Low

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March Consumer Sentiment Falls to 4-Month LowUS consumer sentiment has unexpectedly fallen this month to a four-month low, which indicates household spending may be slow to pick up again from the winter setback.

The Thomson Reuters/University of Michigan preliminary index of sentiment dropped from 81.6 to 79.9 in early March. Economists polled by Bloomberg predicted the measure would rise to 82, while economist polled by MarketWatch predicted a slight drop to 80.8.

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The drop, combined with a slight drop in producer prices last month, may be partially related to the weather. In an analysis after the report, Michael Englund of Action Economics said that consumer sentiment “faces headwinds from economic disruptions related to harsh winter weather, Obamacare, and lingering concerns after last year’s mortgage rate spike and government shutdown.”

The Labor Department’s producer price index fell 0.1% in February after the cost of services fell by the most in nearly a year. In the 12 months ending in February, producer prices rose 0.9%, the smallest annual gain since May 2013. Producer prices excluding food and energy costs fell 0.2%.

Much of the U.S. has suffered from very cold temperatures and blizzards, which may also have contributed to weak hiring. If weather is the primary cause, the Federal Reserve will feel more confident about winding down its monthly bond-buying stimulus plan, which began in January.

Among consumers surveyed, the greatest concern was economic outlook, which indicates larger payroll gains that lead to wage growth are necessary to boost spending. Rising home prices, fewer job cuts, and stocks reaching a record should keep sentiment from dropping too far.

While retail sales rose in February and the most recent jobs report showed solid growth, rising gas prices and concern over Ukraine appears to be making consumers gloomier about the economy.

New data has shown that the labor market is starting to improve from the winter weather. The Labor Department found that unemployment claims unexpectedly fell 9,000 to 315,000, which is the lowest level since November. As demand rebounds, hiring may increase.

Payroll expanded by 175,000 in February after a lower gain of 129,000 in January, although the jobless rate rose to 6.7% from 6.6%.

Pay is also showing signs of improvement. Hourly wages rose 0.4% on average to $24.31, which is the largest gain since June. Average weekly pay increased about one dollar. Further gains in the jobs market should help increase demand.

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