The Economy

Heating Bills Fuel Drop in Consumer Confidence

In preliminary results for March, the University of Michigan's index of consumer sentiment fell to 91.2, from 95.4 last month.
Matthew HellerMarch 13, 2015
Heating Bills Fuel Drop in Consumer Confidence

Sentiment toward the U.S. economy cooled off this month among lower- and middle-income households as higher home-heating bills due to harsh weather fueled a drop in consumer confidence, the University of Michigan reports.

In preliminary results for March, the school’s index of consumer sentiment fell to 91.2 from 95.4 last month. In January, the index reached 98.1, its highest reading in 11 years.

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heatingbillConfidence slipped 6.5% from February among lower- and middle-income households, which are most affected by rising utility bills and gas prices; among households with incomes in the top third, confidence rose 3.2%.

“The renewed concerns expressed by lower- and middle-income households mainly involved income declines and higher utility costs — as well as disruptions to shopping and businesses due to the harsh winter,” Richard Curtin, chief economist at Michigan’s Survey of Consumers, told The Wall Street Journal.

Economists surveyed by The Wall Street Journal expect this month’s drop in the index to be short-lived. “Given the negative impact of the weather, we may see a rebound in the Michigan index this spring,” Guy Berger, economist at the Royal Bank of Scotland, wrote in a research note.

“Where we go from here will depend primarily on what happens to the labor market,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics, told Reuters. “As the wage numbers go up, that would be a plus for confidence.”

Even with the March decline, the Michigan consumer sentiment gauge is above the 88.8 average for the five years leading to the last recession that started in December 2007. A year ago, the index was at 80.

UM’s other indexes also fell in March. Current conditions, which measures Americans’ views of their personal finances, dropped to 103, a four-month low, from 106.9 in February, and the index of consumer expectations slipped to 83.7 from 88.

“Despite the small temporary setbacks, the overall level of consumer confidence remains favorable enough to support a 3.3% growth rate in personal consumption expenditures during 2015,” the university predicted.

High home-heating bills may also have contributed to lower retail sales in the first quarter of this year as consumers spent more on services.

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