Consumer Sentiment Index Slides

Ann Arbor, MI, March 16, 2007--Consumer confidence fell last month from a two-year high as fuel prices rose and employment weakened, according to the Reuters/University of Michigan's final index of sentiment.

The index of sentiment declined to 91.3 in February, a five-month low, from 96.9 in January. The figure compares with a preliminary reading of 93.3 released on Feb. 16.

Lower-income Americans accounted for ``nearly the entire'' drop in confidence, the report said. Such consumers are the ones most likely to feel the pinch of the highest gasoline prices since September. Sentiment among people with higher incomes wasn't as weak, indicating a divergence in attitudes that suggests spending gains may be uneven going forward.

``For consumers, things have gotten a tad more iffy, in the sense that gasoline prices have backed up a bit and the news on the economy is not as robust as it was,'' said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts. ``The bottom line is consumer confidence is high but a little vulnerable.''

The plunge in stock prices on February 27 came too late to influence last month's data and may weigh on sentiment this month instead, the report said. U.S. stocks dropped the most since March 2003 after a plunge in Chinese equities sparked selling worldwide.

The Michigan confidence index was forecast to fall to 93.5, the median estimate of 56 economists in a Bloomberg News survey. Estimates ranged from 91 to 95.7. The university's gauge averaged 87.3 last year.

The Michigan survey's expectations index, which some economists view as an indicator of future spending, fell to 81.5 from 87.6 in January.

The gauge of current conditions, which reflects Americans' perceptions of their financial situation and whether it's a good time to buy big-ticket items like cars, decreased to 106.7 from 111.3.

Consumers in the survey said they expect an inflation rate of 3 percent in one year, the same as in the January survey.