US confidence falls in March
WASHINGTON — 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.
The Conference Board, a New York-based private research group, yesterday said 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 per cent of US economic activity.
Anxiety about US$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 January 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 US$50,000 a year, take-home pay will shrink by about US$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 suggested.
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 per cent from 16.1 per cent, while those expecting their incomes to increase slipped to 13.7 per cent from 15.8 per cent.
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 per cent from 18 per cent a month earlier, while those expecting conditions to worsen rose to 18.3 per cent from 16.6 per cent.