Consumer sentiment unexpectedly worsened in March as worries over a looming recession took hold.
The University of Michigan’s index of consumer sentiment fell to 62.0 in March from 67 in February, an eight percent decline. Compared with a year ago, the index is down four percent.
The midmonth preliminary reading came in at 63.4, so the final number indicates that sentiment continued to deteriorate as March progressed. Economists had expected the final March reading to more or less hold steady with the mid-month score.
Surprisingly, it was not the banking crisis that depressed consumer sentiment.
“This month’s turmoil in the banking sector had limited impact on consumer sentiment, which was already exhibiting downward momentum prior to the collapse of Silicon Valley Bank. Overall, our data revealed multiple signs that consumers increasingly expect a recession ahead,” said Joanne Hsu, the director of the survey.
There were steep declines in both the assessment of current conditions and expectations for the future.
“While sentiment fell across all demographic groups, the declines were sharpest for lower-income, less-educated, and younger consumers, as well as consumers with the top tercile of stock holdings. All five index components declined this month, led by a notably sharp weakening in one-year business conditions,” Hsu said.
Year-ahead inflation expectations fell from 4.1 percent in February to 3.6 percent, the lowest reading since April 2021. Long-run inflation expectations came in at 2.9 percent for the fourth consecutive month.