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Confidence falters again
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March 28, 2000: 10:14 a.m. ET
March consumer confidence index slips to 136.7 amid further market volatility
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NEW YORK (CNNfn) - Confidence among American consumers faltered once again in March as stock market volatility, higher short-term interest rates and surging gasoline prices made people think twice about their economic prospects and spending plans.
The Conference Board reported Tuesday that its key consumer confidence gauge rang in at 136.7 in March, down from a revised 140.8 in February and below Wall Street forecasts of 140.0. The numbers are significant for financial markets because consumer spending accounts for about two-thirds of U.S. economic output. The index is based on a survey of 5,000 U.S. households.
 While weaker for a second straight month, the business group's index still remained at its fourth-highest level ever, indicating consumers are not overly pessimistic about prospects for themselves or for the economy, now in a record 108th month of uninterrupted expansion.
"Despite the brief moderation in consumer attitudes, consumers appear to be spending heavily still, urged on by widespread hiring and income growth," said Steven Wood, an economist with Banc of America Securities.
Of concern to Federal Reserve Chairman Alan Greenspan and other policy makers has been the so-called wealth effect -- the fairly recent phenomenon in which stock market and other paper gains have made Americans feel more confident about their economic outlook. That, in turn, has spurred consumers to pry open their wallets a little wider when it comes to purchasing goods and services.
The wealth effect
To temper that enthusiasm, the Fed has raised short-term rates five times since last June, lifting its benchmark fed funds rate to 6 percent from 4.75 percent. Higher official rates force banks to raise the rates they charge consumers and businesses to borrow, deterring lending. The central bank is widely expected to lift its key rate a sixth time at its May 16 policy meeting.
At the same time, jobs are plentiful, incomes are rising, prices -- with the exception of oil and gas -- are stable, and rates -- while higher -- are not yet at a level that should significantly deter confidence going forward, Calvin Schnure, an economist with Chase Securities, told CNNfn. (550KB WAV) (550KB AIFF)
The Conference Board's present situation index, which measures how consumers feel about their economic situation right now, rose in March to 182.4 from a revised 180.1 in February. The Board's future expectations index, which gauges what consumers expect to encounter six month ahead, fell sharply, declining to 106.2 from 114.6 the month before.
Those who expected the job market to continue at a robust level rose to 52.7 percent from 51.2 percent in February, and those viewing jobs as hard to find fell to 10.4 percent from 11.4 percent. The share of respondents who said they plan to buy a new car in the next six months rose to 4.1 percent from 4 percent, while those who said they plan to purchase a new home declined to 3.8 percent from 4.3 percent last month. 
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The Conference Board
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