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Business Title: U.S. Consumer Sentiment Slips in This Month's Gauge Rather Than Increasing March 12 (Bloomberg) -- Confidence among U.S. consumers unexpectedly declined for a second month in March, a sign Americans are discouraged about the labor market. The Reuters/University of Michigan preliminary consumer sentiment index fell to 72.5 from February’s final reading of 73.6. Economists surveyed by Bloomberg News projected the gauge would increase to 74, according to the median estimate. Gains in confidence that may encourage Americans to pick up the pace of spending depend on payroll growth after the loss of 8.4 million jobs the last two years. Retail sales unexpectedly increased last month, a separate report from the Commerce Department showed today. “Spending will be holding up relatively well for the remainder of this year but it is not going to come roaring back until we get the jobs necessary to lower the unemployment rate,” said Ryan Sweet, an economist at Moody’s Economy.com in West Chester, Pennsylvania. Stocks fell after the report, with the Standard & Poor’s 500 Index declining 0.2 percent to 1,148.19 at 10:12 a.m. in New York. Estimates for the March index ranged from 71 to 78 in a Bloomberg survey. The measure averaged 88.8 during the economic expansion that ended in December 2007. The gauge averaged 66.3 last year and 63.8 in 2008. A measure of current conditions, which reflects Americans’ perceptions of their own finances, fell to 80.8 this month, the lowest since December, from 81.8 in February. Stock Prices Higher stock prices did little to boost sentiment. The S&P 500 has risen 8.8 percent since reaching a three-month low on Feb. 8, through yesterday. So far in March, the S&P is up about 3 percent. The index of expectations six months from now, which projects the direction of consumer spending, declined to 67.2, the lowest level since November, from 68.4 last month. Retail sales increased 0.3 percent in February, according to the Commerce Department in Washington. While stronger than the 0.2 percent decrease projected by economists in a Bloomberg survey, figures for the prior two months were revised down. An absence of job growth and few signs of inflation are reasons Federal Reserve policy makers will keep interest rates near zero when they meet next week, according to the median estimate in a Bloomberg survey. Inflation Outlook Consumers in the Michigan survey said they expect an inflation rate of 2.8 percent over the next 12 months, compared with 2.7 percent projected for February. Over the next five years, the figure tracked by central bankers, Americans expected a 2.7 percent rate of inflation, matching the figure in last month’s survey. Fed policy makers are scheduled to meet March 16 to discuss the direction of the benchmark overnight lending rate between banks. Fed presidents in recent weeks have repeated a pledge to keep interest rates low until the recovery picks up. “With the unemployment rate at 9.7 percent and inflation significantly under my benchmark for price stability, there is no conflict between our policy goals,” Federal Reserve Bank of Chicago President Charles Evans said in a March 9 speech in Arlington, Virginia. “This accommodation will likely be appropriate for some time.” The impetus for improvement in Americans’ outlooks and willingness to spend will likely come from the labor market, and employers may be on the cusp of adding jobs. Payrolls fell a less-than-forecast 36,000 in February, Labor Department figures showed March 5. Job creation has to be the top priority for the U.S., Coca- Cola Co. Chief Executive Officer Muhtar Kent said in an interview March 4. “The consumer is still confused,” he said. “For durable consumer goods there’s no question, there is a reset in the minds of consumers.”
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