March Consumer Sentiment

Consumers’ attitudes were less optimistic in March versus February according to the University of Michigan’s consumer sentiment index. The tally for the period was 80.0, down from 81.6 at the end of the previous period. This is the lowest reading in four months. It seems Americans feel virtually the same about their present situation, but there was a decline in their expectations. Predictions for inflation remained the same.

Consumers seem to be concerned about something on the horizon. It does not seem imminent because current conditions barely budged in March. The tally stands at 95.7 which is nearly identical to the 95.4 measure in February. The downtick in expectations may be driven by concerns about several potential threats to the relatively calm period. Perhaps Americans are worried about the uncertainty around monetary policy. Also, there are new geopolitical tensions between Western Europe, the U.S., and Russia that may have motivated the drop in expectations. The cause of the apprehensiveness is not important to Atlas. Our concern is the impact it makes on consumption.

There is some relationship between consumer attitudes and their willingness to spend money. The drop in sentiment over the last three months may cause Americans to rein in their outlays. A drop in consumption is not good for an economy that depends on spending for roughly two-thirds of its output. The hope is that the chill in American attitudes will abate as the weather warms up. (by C. Cox)