UoM consumer sentiment index falls to 59.7 in March vs. 61.4 expected

• Overall UoM Consumer Sentiment dipped below 60.0 in March, its lowest level since September 2011.
• Recent geopolitical events have affected consumer confidence by exacerbating inflation fears, but currency markets have not reacted much.

According to the preliminary version of the University of Michigan (UoM) Consumer Sentiment survey March released on Friday, the overall Consumer Sentiment Index fell to 59.7, disappointing expectations for a reading of 61.4 and down from February’s reading of 62.8. That marked a low in more than a decade and was the weakest reading since September 2011.

The Consumer Current Conditions index fell a bit to 67.8 from 68.2 last month and was above the expected reading of 66.0. The Consumer Expectations index fell to 54.4 from 59.4 in February, a larger than expected drop to 58.8. Consumer One-Year Inflation Expectations rose to 5.4% from 4.9% the previous month, while Five-Year Inflation Expectations were unchanged at 3.0%.

market reaction

The latest UoM survey highlights the immediate impact that the Russo-Ukrainian war and related stagflationary global economic effect has had on the American consumer. Consumers were already very concerned about the state of inflation in February, but recent geopolitical events have served to exacerbate these fears and in doing so dent confidence.

However, the US dollar in general does not seem to have reacted much. The data further strengthens the case for the Fed to go ahead when it comes to bringing policy rates back to neutral.