<span>Last updated: 17 March 2023 at 10:27 a.m. ET</span>
First published: March 17, 2023 at 10:06 a.m. ET
The numbers: A survey of consumer sentiment fell to 63.4 in March, falling for the first time in four months, reflecting anxiety among Americans about high inflation and the health of the economy.
The preliminary reading in March was down from 67 in February, the University of Michigan said. Most of the research was completed before the collapse of Silicon Valley Bank.
Consuming…
The numbers: A survey of consumer sentiment fell to 63.4 in March, falling for the first time in four months, reflecting anxiety among Americans about high inflation and the health of the economy.
The preliminary reading in March was down from 67 in February, the University of Michigan said. Most of the research was completed before the collapse of Silicon Valley Bank.
The index had fallen to a record low of 50 last summer before partially recovering. However, sentiment is still well below a recent peak of 88.3 in 2021 and a pre-pandemic high of 101.
Inflation expectations fell slightly but remained quite high. Consumers expect prices to rise 3.8% in the next year, down from 4.1% in the previous month. This is the lowest reading since April 2021.
Key details: A gauge of what consumers think about the current state of the economy fell to 66.4 in March from 70.7 the previous month.
Sentiment fell most among lower-income and younger Americans, who tend to suffer disproportionately from high inflation. Some wealthier people with large stock holdings were also less confident in light of a recent drop in stocks.
Another measure, which asked about expectations for the next six months, fell to 61.5 from 64.7 previously.
Americans believe that inflation will continue for some time. In the longer term, consumers believe inflation will rise around 2.8% per year, down slightly from 2.9% in the previous month.
However, that is still well above the Federal Reserve’s 2% target.
Fed officials pay close attention to inflation expectations because they can be a harbinger of future price trends.
The rate of inflation over the past 12 months is 6% based on the consumer price index. That’s down from a 40-year high of 9.1% last summer.
Large image: Consumer sentiment is still well below the level associated with a healthy economy, and it is difficult to see much improvement anytime soon.
The Fed raises interest rates to tame high inflation, a strategy that typically slows the economy.
Higher interest rates have also destabilized parts of the US financial system, as evidenced by the sudden collapse of Silicon Valley Bank. It adds new stress on the economy.
Market reaction: Dow Jones Industrial Average
DJIA
and the S&P 500
SPX
fell in Friday’s trade on nagging concerns about the US financial system following the SVB failure