Not all the economic news is good. Consumer sentiment is taking a surprise plunge so far this month, to 71.8 vs a roughly 79 pace during the last two weeks of February. Weakness is in the expectations component which fell 8.5 points to 61.7 which is the lowest reading since the fiscal impasse and US ratings cut in the third quarter of 2011. And the ongoing impasse, including sequestration, is a likely cause for the sudden lack of confidence in the outlook. The current conditions component also slowed but only slightly, down 1.5 points to 87.5.
Rising gas prices could also be a factor in the lack of confidence in the outlook, but if so it isn't apparent from inflation expectations. The one-year outlook is unchanged at 3.0 percent with the five-year outlook down, not up, one tenth to 2.9 percent.
A separate reading on the 12-month economic outlook underscores the lack of confidence in the economy's direction, falling 17 points to 70. Economic data have been humming lately including this week's very strong retail sales report for February. But today's report, which offers an early look at March, suggests that all the troubles facing the consumer, including this year's increase in payroll taxes, may finally be taking their toll.
Market Consensus before announcement
The Reuter's/University of Michigan's consumer sentiment index for final February rose smartly to 77.6 from a mid-month reading of 76.3. The implied pace for the last half of the month was about 79 which is well above January's 73.8 when the payroll tax shock first struck. Both expectations, at 70.2 versus a mid-month 68.7, and current conditions, at 89.0 versus 88.0, showed gains.