Harsh weather dents consumer confidence

WASHINGTON - Wintry weather and a rise earlier this month in gas prices is denting consumer confidence.

The University of Michigan's consumer sentiment index slipped to 93 this month from 95.4 in February. Richard Curtin, chief economist for the survey, notes that consumer optimism was the highest in a decade for the first three months of 2015 despite the dip in March.

Sentiment shot up to an 11-year high in January, then retreated modestly in February and March. One reason for the pullback: Gasoline prices have been ticking back after a sharp drop in the second half of 2014. Gasoline costs an average $2.43 a gallon, up from low of $2.03 a gallon in late January; but prices at the pump are still down from $3.54 a year ago, according to AAA.

The March drop in confidence was caused entirely by falling confidence among low-income households, which are especially sensitive to high utility bills in the winter. Confidence rose for mid- and high-income households. Another gauge of consumers' spirits, the Conference Board's confidence index, slipped slightly in February but remained near the highest levels since before the Great Recession.

"The weather during February was not very kind to retailers and lower-income households, since many Americans stayed inside cranking up the heat," Chris Christopher Jr., an economist with IHS, said in a note. "By the time March rolled around, household utility bills soared and rising prices at the gas pump took their toll on consumer mood."

The harsh winter in the Northeast and Midwest is also taking a toll on overall economic growth. The U.S. Commerce Department said today that the economy expanded at a rate of only 2.2 percent in final three months of the year, down sharply from 5 percent in the previous quarter. Some private forecasters expect growth to slip below 2 percent for the first quarter of 2015.

For now, the winter blues doesn't seem to be stopping Americans from shopping, with Christopher noting that consumer confidence is much stronger now compared with a year ago. The Commerce Department reported Friday that consumer spending rose at a 4.4 percent annual rate from October through December, the fastest pace since the start of 2006.