Watch CBSN Live

Consumer Confidence Weakens In March

Consumer confidence weakened in March for the second consecutive month, suggesting that consumer spending -- the engine of America's booming economy -- could slow in coming months in the wake of rising interest rates and soaring oil prices.

The Conference Board said Tuesday that its Consumer Confidence Index dropped to 136.7 in March from 140.8 in February and a record 144.7 in January.

The decline was bigger than Wall Street analysts had expected. Expectations were for a March reading of 139.8.

“While optimism about current economic conditions continues at high levels, consumers have turned cautious about prospects for the next six months,” said Lynn Franco, director of the New York group's research center.

She added: “Analysts are waiting to see if a further erosion in confidence triggers a slowdown in consumer spending. As for now, a moderate cutback in consumer spending is unlikely to stifle still-strong economic growth.”

Federal Reserve policy-makers, concerned that too-rapid economic growth could rekindle higher inflation, raised interest rates last week for the fifth time since June to try to cool things down.

The consumer confidence figures, based on a survey of 5,000 U.S. households by the business-funded research group, are closely watched because they provide clues on consumer spending, which constitutes about two-thirds of the U.S. economy.

Most analysts had expected the economy to begin slowing some this quarter in response to Fed interest rate increases. Already, there is some softness in home buying because of higher mortgage interest rates.

Meanwhile, rapidly rising crude oil prices, which have sent heating oil and gasoline costs to record highs, have begun diverting funds that consumers might have spent on other items.

The Conference Board's latest report said that just 14 percent of those surveyed in March expect business conditions to improve in the next six months, down from 17.1 percent in February and 20 percent in January.

Consumers were more optimistic about jobs, with 15.5 percent expecting employment opportunities to improve in coming months, up slightly from February but below the 16.5 percent in January.

View CBS News In