CORRECTED-LIVE MARKETS-Wartime sentiment: UMich takes another swing at March

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WARTIME SENTIMENT: UMICH TAKES ANOTHER SWING AT MARCH

In the coming weeks and months, investors will start to see increasing evidence of the impact of the war on Iran on the U.S. economy.

The University of Michigan's (UMich) second and final stab at March consumer sentiment USUMSF=ECI is among the first.

The short version: UMich knocked 2.2 points off its initial reading of 55.5, leaving the index at 53.3.

That means the mood of the American consumer, burdened with about 70% of the U.S. economy, deteriorated by 5.8% from February.

Survey participants' assessment of present conditions and near-term expectations were also downwardly revised, and now reflect monthly declines of 1.4% and 8.7%, respectively.

Noting that about "two-thirds completed after the start of the U.S. military conflict in Iran," Joanne Hsu, UMich's director of consumer surveys adds, "Declines were seen across age and political party."

"Overall, the short-run economic outlook plunged 14%, and year-ahead expected personal finances sank 10%," Hsu adds.

The graphic below shows consumer expectations currently sit 21.5% below the initial pandemic-related shutdown shock.

The inflation expectations element showed respondents now expect annual price growth of 3.8% a year from now. That's 40 basis points above UMich's preliminary March take, or 1.3 percentage points hotter than the most recent core CPI reading.

Longer-term, consumers expect annual inflation of 3.2% five years from now, a repeat of February's number.

With respect to the war on Iran and its effect on the broader economy, Oxford Economics (OE) - in the latest update of its Recession Monitor - says that the conflict clouds the economic outlook and depends entirely on a range of possible scenarios, "ranging from a benign de-escalation to a severe oil shock."

"The biggest downside risk runs through equity prices and the labor market," writes Matthew Martin, OE's senior U.S. economist. "A sharper correction in the stock market could weigh on higher-income consumer spending, and if layoffs accelerate from here, the thin cushion in household savings leaves little room to absorb the blow."

(Stephen Culp)

EARLIER ON LIVE MARKETS:

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LESSONS FROM THE PAST CLICK HERE

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