Survey likely to show US consumer gloom deepened in March
By Ross Finley
NEW YORK, March 13 (Reuters) - Rising layoff announcements by U.S. firms, swooning stock markets and a severe economic slump likely dented consumer confidence again in March, economists said on Tuesday.
Jittery financial markets and the Federal Reserve will closely watch Friday's release of the University of Michigan's key confidence index, which has tumbled over the past three months at a rate not seen since the last recession.
Analysts said a worsening economic climate since last month is likely to show consumers' assessment of their current financial picture is unraveling.
Until now, the Michigan survey has shown that while consumers hold increasingly bleak expectations for the future, they have not yet felt personally vulnerable to the economy's weakness.
``The gap is going to start closing very quickly with more rapid deterioration in the assessment of current conditions as people start to understand that these cutbacks in employment may begin to hit home,'' said David Resler, chief U.S. economist at Nomura Securities International.
Economists are expecting a weak report, in part because Friday's survey will include telephone responses from consumers following Monday's sharp stock market sell-off and recent mass layoff announcements from Internet networking company Cisco Systems (NasdaqNM:CSCO - news) and mobile communications giant Motorola (NYSE:MOT - news).
The Standard & Poor's 500 Index, (^SPX - news) which tracks the share prices of America's most valuable companies, on Monday stumbled into its first bear market -- down more than 20 percent from its high -- since the 1987 stock market crash. The Nasdaq composite index, heavily weighted by battered technology shares, plummeted 6.3 percent on Monday, to its first close below 2,000 since December, 1998.
Economists surveyed by Reuters expected the March preliminary consumer sentiment index, scheduled for release to market subscribers at 10 a.m. (1500 GMT) on Friday, tumbled to 89.5 in March from 90.6 in February.
While the headline sentiment gauge may not fall as dramatically as in recent months, analysts said the ``current conditions'' index will likely fall sharply, playing catch-up with the recent erosion in the future ``expectations'' index.
In February, the current conditions index read 105.8, holding 25 points higher than the expectations gauge, which measured 80.8.
``Most of the decline has been in the perceptions about the economy in the future, not about the economy today. But what I think what will happen is we'll see that the current conditions will probably decline more,'' said Mark Vitner, economist at First Union Securities in Charlotte, N.C.
The Fed has recently voiced concern that consumer spending, which represents two-thirds of all economic activity, could stumble and unleash a recession.
Top central bankers, including Federal Reserve Chairman Alan Greenspan, have said that consumer spending has so far held up fairly well despite slumping confidence, but that they are monitoring the situation.
On Tuesday, the government reported that retail sales in February fell 0.2 percent after an upwardly revised 1.3 percent gain in January.
U.S. chain store sales were mixed in the first week of March as bad weather dampened already light shopper traffic and sluggish spending, causing most retailers to miss their sales targets for the week, two other reports issued Tuesday said.
Founded shortly after the end of World War II as an annual survey, the Michigan index was converted to a quarterly survey in 1952 and then to a monthly report in 1978. In January 1991, the research group began releasing its survey twice monthly, in preliminary and final series.
The university surveys roughly 500 consumers each month, with about 250 represented in the preliminary survey.
The other main gauge of consumer sentiment, the Conference Board's confidence index, has shown a similar gap between present situation and expectations in recent months. The next report is scheduled for release on March 27.
The Conference Board, a New York-based research firm, surveys roughly 5,000 consumers by telephone in the first two-thirds of each month, according to Ken Goldstein, an economist at the Board. |
