NEW YORK – Rising prices at the gas pump and in grocery aisles are starting to crimp shoppers’ outlook.
The Conference Board’s Consumer Confidence Index fell sharply from a three-year high in February, reversing five straight months of improvement.
The decline raises questions about Americans’ ability and willingness to spend in coming months.
The index fell more than expected to 63.4 from a revised 72.0 in February. Economists expected 65.4, according to FactSet.
The drop was the steepest since the 10.1-point plunge from January 2010 to February 2010, when the U.S. stock market was hammered by worries about Greece’s national debt.
“Rising food and gasoline prices are starting to take their toll on the consumer psyche, and Japan’s triple calamity – earthquake, tsunami and nuclear disaster – has been very unsettling,” said Chris Christopher Jr., senior principal economist at HIS Global Insight.
The index measures how Americans feel about business conditions, the job market and the next six months.
It has hovered in a tight range from the high 50s to low 60s over the past year, far below the 90 that indicates a healthy economy. The index hasn’t approached that level since the recession began in December 2007.
The falling Consumer Confidence Index is in line with Gallup Poll’s weekly surveys, which have registered a slide in confidence since mid-February.
Economists monitor confidence because consumer spending, including big-ticket items such as housing and health care, accounts for about 70 percent of U.S. economic activity and is critical for a strong rebound.
“Consumers’ inflation expectations rose significantly in March and their income expectations soured, a combination that will likely impact spending decisions,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement.
Rising prices are showing up in several noticeable ways.
The national average for a gallon of gas hit $3.584 Monday, the highest ever for this time of year, according to AAA, Wright Express and the Oil Price Information Service. Gasoline prices have jumped 25.1 cents in the past month and 78.1 cents from a year ago.
Food prices are expected to increase 3 to 4 percent this year, with the steepest increases in dairy, meat and coffee. Clothing retailers are raising prices as they face soaring costs for labor in China and raw materials.
The Conference Board survey, conducted by The Nielsen Co., is based on a random survey mailed to 3,000 households March 1-March 16.