Rising oil prices impact sentiment, US consumer confidence in March drops to lowest level this year.

Consumer confidence in the United States saw its first decline in nearly four months in March, dropping to its lowest level since 2026. According to data released by the University of Michigan, the Michigan Consumer Sentiment Index fell 1.1 points to 55.5 in March, a decrease of about 1.9% from the previous month, slightly higher than the market's expectation of 55.0. The current index level is in the 2nd percentile of its historical distribution, indicating that consumer confidence remains extremely low. The Michigan Consumer Sentiment Index is an important indicator that measures American consumers' outlook on the economy, personal financial situation, business environment, and purchasing conditions. The University of Michigan conducts monthly surveys and releases preliminary and final reports in the middle and end of each month. Joanne Hsu, director of the Michigan Consumer Surveys, stated that consumer confidence dipped slightly to its lowest level of the year in March. She pointed out that a survey conducted before the military action against Iran showed an improvement in consumer sentiment compared to the previous month, but the confidence significantly decreased during the 9-day survey period following the outbreak of conflict. Hsu pointed out that the rising gas prices are one of the most direct factors affecting consumers, and the extent to which energy costs transmit to other goods and services prices remains uncertain. At the same time, consumers across different income groups, age groups, and political affiliations generally expressed a decrease in expectations for their personal financial outlook, with expectations falling by 7.5% nationwide. The survey was conducted from February 17 to March 9, with about half of the interviews completed after the outbreak of conflict in Iran. Historically, consumer confidence levels are significantly below long-term averages. The current index is approximately 33.9% lower than the average level of 84.0 since 1978, and approximately 33.0% lower than the geometric average level of 82.8. Furthermore, the current level is lower than the levels at the start of the last six U.S. economic recessions, further highlighting the fragility of consumer sentiment. In terms of sub-indices, consumers' perception of the current economic situation improved, but expectations for the future deteriorated significantly. The Current Economic Conditions Index (CECI) rose for the third consecutive month to 57.0 in March, an increase of 2.1% from the previous month, but still a 9.4% decrease from the same period last year, and above the market expectation of 54.9. This index reflects consumers' evaluation of their current personal financial situation and the overall economic environment. In contrast, the Consumer Expectations Index (CEI) declined for the second consecutive month to 54.1 in March, a 4.4% decrease from the previous month, but a 2.9% increase from the same period last year, slightly below the market expectation of 54.5. This index mainly reflects consumers' expectations for future economic and personal financial situations. In terms of inflation expectations, after six consecutive months of decline, the one-year inflation expectation stopped falling and remained at 3.4%. This level is higher than most readings before 2024, and significantly higher than the range of 2.3% to 3.0% in the two years before the pandemic. Meanwhile, the long-term inflation expectation slightly decreased to 3.2%, whereas this index typically remained below 2.8% between 2019 and 2020. The survey also showed that interviews conducted after February 28 generally had higher inflation expectations, indicating that the rise in energy prices and geopolitical tensions are influencing consumers' judgments of future prices. In terms of other consumer sentiment indicators, the overall trend of the World's Large Enterprises Association Consumer Confidence Index is generally consistent with the Michigan Index, although the former is more susceptible to the impact of employment and labor market conditions, while the latter focuses more on household financial situations and inflation pressures. Furthermore, the overall sentiment reflected in the Michigan Consumer Survey is generally consistent with the mood changes of small business owners as indicated by the National Federation of Independent Business (NFIB) Small Business Optimism Index, indicating a general cautious attitude towards the future economic outlook.