NEW YORK – A gauge of U.S. consumer sentiment slid to its lowest in almost a decade in March after hopes for a quick end to war in Iraq gave way to worries of an arduous conflict and the economy showed few signs of perking up.
The University of Michigan's final index of consumer sentiment for March fell for a third straight month to 77.6, its lowest since September 1993, from 79.9 in February, market sources told Reuters Friday.
That was better than a mid-month reading of 75.0 and a 75.3 forecast by economists, perhaps helped by optimism after early successes of U.S.-led forces, analysts said. The expectations index also rose from its mid-month level even as attitudes about the current state of the economy soured further.
Most of the responses compiled for the final March survey were taken before the battle in Iraq bogged down, and analysts said April's measure of sentiment would better reflect the impact on confidence from subsequent casualties and the war's slowing progress.
Consumers have had little to cheer about in recent months, with confidence battered by rising layoffs, stock market losses, fears of terror attacks and, until this month, uncertainty about the outbreak of war.
With the conflict now underway, economists said sentiment would likely react to developments in Iraq.
"What happens next likely depends greatly on the progress of the war," said Ian Shepherdson, chief U.S. economist at High Frequency Economists. But Shepherdson said the improvement in sentiment during the second half of the month was a "modest pleasant surprise all the same."
Financial markets looked past the consumer sentiment data to focus on the likelihood of an extended war. Stocks and the dollar fell while Treasuries gained for a fifth straight session.
Continuing erosion in confidence has taken its toll on spending, with retail sales, auto sales and even the robust housing market all showing signs of weakening.
A persistent retrenchment by consumers would likely tip the economy back into recession.
But for the most part consumers have stayed resilient, leaning on extra income generated by refinancing mortgages to take advantage of low interest rates, even as businesses struggle to shake off the hangover from the previous boom.
The current conditions index, which tracks consumers' attitudes about their present financial situation, fell to a final reading of 90.0 in March from 95.4 in February and a mid-month reading of 87.1. The expectations index, which gauges the 12-month outlook, fell to 69.6 from 69.9 in February but was above a mid-month reading of 67.2.
The final University of Michigan consumer sentiment survey is based on telephone interviews with 500 households across the country on personal finances and business and buying conditions.