NEW YORK – Consumer confidence dropped more than expected in March, sending the widely watched index to its lowest level since November, as shoppers became anxious about a run-up in gasoline prices and stock market turbulence.
The New York-based Conference Board said Tuesday that its Consumer Confidence Index fell to 107.2, down from the revised 111.2 in February. Analysts had expected a reading of 109. The March index was the lowest since November 2006 when the reading was 105.3.
In a statement, Lynn Franco, director of the Conference Board Consumer Research Center, said that despite diminished expectations, consumers' assessment of the economy was steady and the report does not "suggest a weakening in economic conditions."
"The recent turmoil in financial markets coupled with the run-up in gasoline prices may have contributed to consumers' heightened sense of uncertainty and concern. The direction of both components over the next few months bears watching to determine whether this decline is just a bump in the road or something more substantial," Franco said.
Economists closely monitor consumer confidence because consumer spending accounts for two-thirds of all U.S. economic activity.
The Present Situation Index, which measures how shoppers feel now about economic conditions, increased slightly to 137.6 from 137.1 in February. The Expectations Index, which measures consumers' outlook in the next six months, declined to 86.9 from 93.8.
The report was a bit sobering for retailers and other businesses that rely on consumer spending.
The arrival of warmer weather this month — following an unusually cold January and February — has helped the nation's retailers catch up to a slow start to the spring selling season. But a slowing economy, particularly a weakening housing market, could challenge shoppers in the months ahead. Rising defaults and delinquencies in subprime mortgages and fewer home equity withdrawals that give consumers extra cash could curtail spending.
The latest report on new home sales, issued Monday, dimmed hopes for a rebound in the housing market. Sales of new homes fell sharply for a second consecutive month in February, the Commerce Department reported. It also said that sales of new single family homes fell by 3.9 percent last month to a seasonably adjusted annual rate of 848,000, the slowest sales pace in nearly seven years.
Meanwhile, there are concerns about rising gasoline prices. The national average price for gasoline climbed for the eighth straight week, according to a government report released Monday.
Concerns about the housing market, the economy and consumer spending have made investors jittery, putting pressure on the stock markets which had surged in the second half of 2006.
Counterbalancing that is the job market, which has been solid.The Labor Department reported earlier this month that the nation's unemployment rate dipped to 4.5 percent even as big losses of construction and factory jobs limited overall payroll growth.