U.S. consumer sentiment tumbled to its lowest since December 2011 in early March, hit by dissatisfaction with government economic policies and as fewer Americans expected to see improvements in growth or the labor market, a survey released on Friday showed.
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The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment dropped to 71.8 from 77.6 in February, short of expectations for 78.
Across-the-board government spending cuts of $85 billion went into effect at the beginning of the month after U.S.lawmakers failed to come to a new deal. A record 34% of respondents made unfavorable references to government economic policies, beating January's prior record of 31%.
"The frustrations expressed by consumers essentially involve how little consideration has been given to how the government's inability to reach a compromise affects people's economic situation,'' survey director Richard Curtin said in a statement. The barometer of current economic conditions fell to 87.5 from 89, while the gauge of consumer expectations tumbled to 61.7 from 70.2, its weakest since November 2011.
Thirty percent of consumers expected the pace of economic growth would worsen in the coming year, up from 22% the previous month, while 38% expected the unemployment rate to increase, up from 27%.
Still, the damage to buying plans has so far been minimal, the survey found. The index of buying conditions for durable goods eased just slightly to 139 from 140.
The one-year inflation expectation held steady at 3.3% and the five-to-10-year inflation outlook edged down to 2.9% from 3%.