Burdened by rising prices at the pump and grocery store, consumer confidence took a noteworthy step backwards in March. Consumer confidence fell sharply to 63.4 in March after reaching a three-year high last month.
Today, we also learned that home prices continued to slip, yet another disappointment for consumers. Although it appears that the housing market is stabilizing, prices nationally may continue to falter as prices seek a bottom.
The experience of the Great Recession and severe stock market volatility left consumers on weak footing and has had a lasting impact on consumer psyche. That has been compounded by the steady drumbeat of residual concerns about the depressed housing market, persistently high unemployment, and the evolving global debt picture.
The recent acceleration in inflationary pressures, particularly related to food and fuel prices, is likely to weigh on discretionary spending if it persists. Today’s report illustrated that consumer fear about future inflation is starting to pick up, even as they became more skeptical about future income growth.
Overall, we recognize that the confidence survey is volatile and anticipate that the consumer will be resilient. Underlying economic growth appears to be good and the jobs market has been providing signs of further improvement in recent months. We are likely looking at a continuing pattern of “two steps forward, one step back” in terms of the collective mood given the sources of uncertainty and risk that will not be easily resolved.
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