Consumer confidence drops amid higher gas prices

Confidence fell to 70.2 percent, down from a revised 71.6 percent in February, the highest level in a year, The Conference Board said Tuesday.

While high gas prices are creating concern among consumers and are weighing on household budgets, confidence is likely being buoyed by an improving labor market and other signs that the economic recovery has gained traction. 

Meanwhile, the present situation index increased to 51 percent from 46.4 percent — the highest level since September 2008 —  suggesting that despite this month's dip in confidence, consumers don't think economic recovery is losing steam. 

Confidence figures are looked at closely by economists because they drive consumer spending, which accounts for about 70 percent of the economy. 

The expectations index for six months down the road declined to 83 percent from 88.4 percent in February.

"Consumer confidence pulled back slightly in March, after rising sharply in February," said Lynn Franco, director of The Conference Board Consumer Research Center in a statement. 

"The moderate decline was due solely to a less favorable short-term outlook, while consumers’ assessment of current conditions, on the other hand, continued to improve," she said. 

Confidence has gradually improved since it hit a trough of 25.3 percent in February 2009. Still, a healthy level of confidence is 90 percent, which was last hit the same month the economy went into recession, in December 2007. 

Consumers' appraisal of current conditions improved in March. 

Those claiming business conditions are "good" increased to 14.3 percent from 13.7 percent.  

However, those claiming business conditions are “bad” also increased, to 32.7 percent from 31.7 percent. 

Consumers' assessment of the job market remained mixed. 

Those saying jobs are "plentiful" increased to 9.4 percent from 7.0 percent, while those stating jobs are "hard to get" also rose, to 41 percent from 38.6 percent.

The labor market has added 734,000 jobs in the past three months, including 227,000 in February, the third month of gains above 200,000.

The outlook for the labor market was a bit more pessimistic despite the consistent improvement. 

Those anticipating more jobs in the months ahead decreased to 17.3 percent from 18.8 percent, while those anticipating fewer jobs increased to 18.3 percent from 16.4 percent. 

The proportion of consumers expecting an increase in their incomes improved slightly to 15.8 percent from 15.5 percent. 

Consumers were less optimistic about the short-term outlook than they were in February.   

The proportion of consumers expecting business conditions to improve over the next six months increased to 19.2 percent from 18.9 percent.

However, those anticipating business conditions will worsen also rose, to 13.5 percent from 11.8 percent.