Fiscal Policy Worries Hit Consumer Sentiment

In the first part of March, consumer sentiment plunged to its lowest point since December of 2011. Experts believe the consumers dissatisfaction with the economic policies of the government and fewer people expect improvements to be seen in the labor market or growth, fueled the decline.

The University of Michigan/Thomson Reuters first reading of the index for consumer sentiment fell from February’s 77.6 to 71.8. The expectation was the index would rise to 78.

The government budget cuts that are across the board of more than $85 billion were put into effect on March 1, after lawmakers in the U.S. were not able to come up with an alternative plan.

Thirty-four percent of the respondents, a record number, made references that were unfavorable to the economic policies of the government. That percentage surpassed the prior record that had been 31% and took place in January.

The gauge for the current economic conditions dropped from 89 to 87.5, while the barometer for consumer expectations plummeted from 70.3 to 61.7, which is the weakest it has been since November of 2011.

More than 30% of consumers said they expect the economic growth pace to worsen during 2013, which was up from February’s 22%. Thirty-eight percent expected the rate of unemployment to go up, which was up for last month’s 27%.

The expectation for one-year inflation remained at 3.3% and the five to 10-year rate for inflation outlook was down from 3% to 2.9%.

Damage to plans for buying thus far has remained minimal, as the buying conditions related to durable goods eased from 140 to 139.

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