The optimism of American consumers faded in March as a split emerged between the outlook of lower and middle income families and those of the top tier.
The University of Michigan's preliminary consumer sentiment index slipped to 91.2 from 95.4 in February and a post-recession high of 98.1 in January. Economists in the Reuters survey had forecast a score of 95.5.
The drop in the overall index was driven by a decline in the lower two of three income categories used by the pollsters.
"Consumer optimism slipped in early March among lower- and middle-income households (-6.5 percent from February) while confidence improved among households with incomes in the top third ( 3.2 percent)," reported survey director Richard Curtini in a statement accompanying the release.
Despite the 4.2 point decrease which was the biggest one month drop in the index since July 2013, the it remains well above the 81.7 average of the last two years.
Falling gasoline prices, which had been the source of consumer optimism, have surged higher over the past six weeks after reaching a more than five year low at $2.03 for a gallon of regular gasoline on January 25. Yesterday the nationwide average was $2.44, according to the American Automobile Association.
The steep decline in energy costs since last summer was important in the face of stagnant wages because it had allowed households to switch expenditures from fuel to discretionary items. In fact, most families chose to save their newly freed income rather than spend it. A choice evidenced by the rising saving rate and three straight month of declining retail sales through February.
The survey’s measure of current economic conditions slipped to 103.0 from 106.9 in February below the expectation of 105.7. The gauge of economic expectations fell to 83.7 in March from 88.0 the prior month, also less than the 87.7 median predictions from analysts.
Equites were lower after rising the most in a month yesterday. The Dow was off 234 points to 17,660 at 2:40 pm in New York. The dollar surged to eleven year highest against the euro at 1.0465 as the European currency's early rally to 1.0636 collapsed. The dollar reached 121.59 versus the Japanese Yen, within striking distance of its eight year high on Tuesday at 122.03.
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