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Michigan sentiment index drops
Closely watched measure of consumer confidence lower than expected in early March.
March 14, 2003: 11:21 AM EST

NEW YORK (CNN/Money) - A closely watched measure of consumer confidence in the United States fell in March to its lowest level in more than a decade, a published report said Friday, coming in worse than analysts expected.

The University of Michigan's consumer sentiment index fell to 75.0 -- the lowest since October 1992 -- from 79.9 in February, according to a Reuters report. Economists, on average, expected a reading of 77.6, according to a Reuters poll.

The index's current conditions component, measuring how consumers feel about the present state of the economy, fell to 87.1 from 95.4 in February, according to Reuters. The expectations index, measuring how consumers feel about the future, fell to 67.2 from 69.9 in February.

The report had little impact on U.S. stock prices, which were higher in early trading. Treasury bond prices rose.

Economists pay close attention to U.S. consumers, whose spending makes up more than two-thirds of U.S. gross domestic product (GDP), the broadest measure of the economy.

Consumer confidence has crumbled in recent months, the result of a worsening labor market, the build-up to a U.S.-led war in Iraq, skyrocketing oil and gasoline prices, and warnings of possible terrorist attacks.

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What are consumers telling us?

Consumers have kept spending despite these woes, keeping the economy afloat, but there have been signs lately that their perseverance is wearing thin. On Thursday, the Commerce Department reported falling February retail sales that were much worse than analysts expected.

Spending has in part been supported by super-low interest rates that have led to strong demand for housing, raising home values, improving consumer wealth, and letting people refinance their mortgages at lower rates.

But the housing market can't drag the world's biggest economy along behind it forever, and mortgage rates seem unlikely to go much lower. Most economists think another catalyst will be necessary to support growing consumer spending in the coming months.

Most economists think business spending and hiring will gather steam as soon as the situation in Iraq is resolved, but some think the damage done by crippled confidence and higher oil prices early this year will take some time to sort out.  Top of page

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