US consumer sentiment declined to a three-month low as fears mounted in recent weeks about the impact on gasoline prices from the war with Iran.
The preliminary March sentiment index dropped to 55.5 from 56.6 in February, according to the University of Michigan. The survey period included responses from Feb. 17 to March 9. The median estimate in a Bloomberg survey of economists called for a reading of 54.8.
Consumers expect prices to rise at an annual rate of 3.4% over the next year, unchanged from a month earlier, data Friday showed. And they saw costs rising at an annual rate of 3.2% over the next five to 10 years, down slightly from the previous month.
Looking ahead, sentiment may succumb to higher fuel prices tied to the US-Israel war with Iran at a time when Americans were already troubled by a high cost of living. A still-fragile labor market, illustrated by a weak February jobs report, could also further dampen spirits.
Separate figures out Friday from the Bureau of Labor Statistics showed that while job openings rose in January and layoffs fell, the hiring rate was unchanged.
According to another report, the Federal Reserve’s preferred measure of underlying US inflation rose a firm 0.4% in January even before the war in the Middle East.
For Fed officials who are widely expected to hold interest rates steady at their policy meeting next week, uncertainty about the inflation outlook risks limiting prospects for a rate cut over the coming months.
“Interviews completed prior to the military action in Iran showed an improvement in sentiment from last month, but lower readings seen during the nine days thereafter completely erased those initial gains,” Joanne Hsu, director of the survey, said in a statement.
Concerns increased about gas prices after the airstrikes on Iran, she said. That helped push this month’s average year-ahead gas price expectation to the highest since 2022.
“Going forward, any tightening in world energy markets will provide further upward pressure on gas price expectations and will likely push overall inflation expectations higher as well,” Hsu said.
The current conditions gauge rose to a five-month high of 57.8, while the expectations index slid to the lowest since November.
Consumers’ outlooks for their financial situation and the broader economy deteriorated.
Written by: María Paula Mijares Torres and Jarrell Dillard @Bloomberg
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