Consumer confidence slips
NEW YORK (Reuters) - Consumer confidence weakened in March as higher gasoline prices and recent turmoil in financial markets made Americans nervous about the future, a report showed on Tuesday.
A separate report showed U.S. single-family home prices plummeted in January, the first annual decline in home values in more than a decade.
The Conference Board said its consumer confidence index fell to 107.2 in March, from a downwardly revised 111.2 the prior month, with rising gasoline prices and falling stock prices contributing to the slightly more pessimistic mood.
Economists polled by Reuters expected a reading of 108.5.
The latest report also comes as rising subprime mortgage rates have squeezed high-risk borrowers with weak credit.
"Seven-month highs in gasoline prices, stock market volatility and the ongoing subprime debacle were the likely factors behind the weaker reading," said Ron Simpson, director of currency research at Action Economics in Tampa, Florida.
U.S. stocks extended losses after the report raised doubts about future consumer spending and the dollar slipped against the euro.
Slightly higher consumer concerns about inflation, though, nudged benchmark government bond prices lower.
"We have energy pressures. Over time that is still the one thing that has been a challenge to keeping inflation low. Also it's not unusual when the economy slows for inflation to lag behind that," said Peter Kretzmer, senior economist at Banc of America Securities in New York.
At a conference in Prague on Tuesday, Cleveland Federal Reserve Bank President Sandra Pianalto said the central bank continues to watch closely for signs that inflation does not moderate as much as expected.
The Fed has held interest rates steady at 5.25 percent since August. Financial markets expect the Fed to lower rates later in the year but are unsure when it might occur.
HOUSING SLUMPS, CONSUMERS SPEND
A big factor in that decision is likely to be the health of the U.S. housing market.
The Standard & Poor's/Case-Shiller's home price index for 10 metropolitan areas released Tuesday fell 0.7 percent in the year to January. That was the first year-over-year drop in home values since January 1994.
"The annual declines in the composites are a good indicator of the dire state of the U.S. residential real estate market," Robert J. Shiller, chief economist at MacroMarkets LLC, said in a release.
Also Tuesday, No. 3 U.S. home builder Lennar Corp said declining home prices and the subprime lending crisis contributed to a 70 percent plunge in quarterly earnings.
A report earlier in the week showed sales of new U.S. homes unexpectedly fell 3.9 percent in February to the lowest rate in nearly seven years.
Economists worry that falling home prices and the subprime crisis could spark lenders to tighten credit to a wider swath of borrowers, thus depressing consumer spending and slowing growth.
So far, though, housing problems seem to be having a limited effect on overall consumer attitudes, partly, perhaps, because jobs remain plentiful.
The International Council of Shopping Centers and UBS Securities reported chain store sales rose 0.2 percent last week from the previous week and were up 4.6 percent compared to the same week last year.
Meanwhile, Redbook Research said in its report that chain store sales were up 4.3 percent last week compared with a year earlier.
"For the consumer, the problem in the subprime area is not spilling over into the broader economy," said Mark Vitner, senior economist at Wachovia Securities in Charlotte, North Carolina. "The latest report on consumer confidence does not show that there are signs of imminent doom."
