— WASHINGTON (AP) — Americans are less confident in the economy than they were last month as massive government spending cuts have stoked economic uncertainty.
It's just the latest swing in the way Americans feel about the economy. Their views have fluctuated between optimism and angst over the months as they've weighed an advancing stock market and housing recovery against new economic challenges.
The Conference Board, a New York-based private research group, said Tuesday that its Consumer Confidence Index fell in March to 59.7 from a revised reading of 68 in February and the 68.7 that analysts polled by research firm FactSet expected. Confidence is still far off from the 90 reading that indicates a healthy economy.
The index is closely watched by economists because it makes a monthly gauge of how Americans are feeling about their jobs, incomes and other bread-and-butter issues. That's important because consumer spending accounts for 70 percent of U.S. economic activity.
Anxiety about $85 billion in across-the-board government spending cuts that took effect March 1 caused the decline in the index, the group said. The spending reductions, which were triggered after Congress and the White House failed to resolve a budget impasse, have "created uncertainty regarding the economic outlook," Lynn Franco, the Conference Board's director of economic indicators, said in a statement
Congress and the Obama administration reached a deal on Jan. 1 to prevent income taxes from rising on most Americans. But they allowed a temporary cut in Social Security taxes to expire. For a worker earning $50,000 a year, take-home pay will shrink by about $1,000.
That has a more direct impact on most Americans than the government spending reductions, noted Scott Brown, chief economist at investment firm Raymond James.
The March drop in the confidence index "likely reflects the impact of higher gasoline prices as well as the higher payroll tax," Brown said. Although the payroll tax increase kicked in three months ago, its effect may just now be sinking in for some people, he suggested.