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 says.
The Conference Board's survey was conducted from March 1 through March 14. The sharp decline in the March index was caused mainly by a drop in expectations for the economy, though consumers also were more pessimistic regarding current economic conditions, the group said. The number of people anticipating more jobs in the months ahead fell to 12.3 percent from 16.1 percent, while those expecting their incomes to increase slipped to 13.7 percent from 15.8 percent.
Consumers also are again pessimistic about the short-term outlook for the economy, the group said. The proportion of people expecting business conditions to improve over the next six months fell to 14.4 percent from 18 percent a month earlier, while those expecting conditions to worsen rose to 18.3 percent from 16.6 percent.Chris Christopher, director of consumer economics at IHS Global Insight, said he expects consumer confidence to recover as the "shock value" of the mandated spending cuts wanes. However, "smaller paychecks, depressed consumer mood, and rising (gasoline) prices are not very favorable for elevated levels of discretionary spending," Christopher wrote in a research note. The decline in consumer confidence comes as Americans are seeing some signs of an improving economy. Stock prices have roughly doubled since June 2009. And the job market, while still tough, is rebounding. Employers added 236,000 jobs in February, driving the unemployment rate down to 7.7 percent, its lowest level in more than four years. The gains signaled that companies are confident enough in the economy to intensify hiring even in the face of tax increases and government spending cuts.