Bloomberg News

NEW YORK - U.S. consumer confidence fell more than forecast in March as expectations for the economy later this year sank to a five-month low, the Conference Board reported Tuesday.

The consumer confidence index fell this month to 136.7 from February's 140.8 and January's record of 144.7, the New York-based research group said. The index gauging current conditions rose after slipping last month, and the measure of consumer expectations for the next six months dropped to its lowest since October.

"Economists are making the case that confidence is still high - which it is - but that is irrelevant," said Christopher Low, chief economist at First Tennessee Capital Markets in New York. "As long as confidence continues to slip from its January high, spending will slow."

Analysts had expected consumer confidence to fall to 139.9 this month, citing volatile stock prices and rising gasoline and fuel oil prices. They're "waiting to see if a further erosion in confidence triggers a slowdown in consumer spending," said Lynn Franco, director of the Conference Board's consumer research center. "As for now, a moderate cutback in consumer spending is unlikely to stifle still-strong economic growth."

Dan Nordstrom, chief executive of Nordstrom Inc.'s Internet division, agreed. "We are not seeing that reflected in our business," he said of the drop in the confidence index.

Greenspan's Concerns

Confident consumers, an unemployment rate near 30-year lows, and rising incomes have translated into increased spending on goods and services as the economy enters a record 10th year of expansion next month. Federal Reserve Chairman Alan Greenspan has signaled interest rates will have to keep rising if demand exceeds the economy's ability to supply goods and services.

"What we are looking at is, basically, the indications that demand chronically exceeds supply for the intermediate period," Mr. Greenspan said during his semi-annual address to Congress on Feb. 23.

Last week the Fed's Open Market Committee raised the overnight bank lending rate a quarter point, to 6%; it was the fifth increase since June.

"Clearly consumers are aware of how strong economic growth is, but are also aware that the Fed is working to change that," Mr. Low said.

The index tracking the consumer assessment of present conditions increased to 182.4, from 180.1 in February. The index gauging consumer expectations for the next six months fell to 106.2 in March from 114.6 during February.

The share of respondents who saw jobs as plentiful rose to 52.7%, from 51.2% in February. The share seeing jobs as hard to get fell to 10.4%, from 11.4%.

New Cars and Homes

The share of respondents who said they planned to buy a new automobile in the next six months rose to 4.1%, from 4% in February. Those who said they planned to buy a house fell to 3.8%, from 4.3%.

Stocks were mixed for most of March as the Dow rose and the Nasdaq started to decline in the middle of the month. The Dow rose 4.6%, to 10,595 by March 17, from 10,128 at the end of February. After rising to a record intraday high 5,132.52 on March 10, the Nasdaq fell below 4,500 before recovering at month's end.

March also brought record high gasoline prices for consumers.

The price of gas rose to $1.529 a gallon - the highest ever - during the week that ended March 20, according to weekly Department of Energy statistics. That's up 7.6% since the end of February and 20% since the end of last year.

"Spending more dollars at the gas pump has dented consumer confidence," Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi Ltd. in New York, said before the report was released. "It means they have less money to spend on movies, books, dining out."

Oil Prices

Oil prices were little changed in New York on Tuesday as traders awaited the result of a meeting Tuesday of the 11 ministers of the Organization of Petroleum Exporting Countries in Vienna.

The group wants to relax output limits that sent oil to a nine-year high of close to $32 a barrel. Just 15 months ago, oil was at $9.55 a barrel.

The group will try to resolve a dispute between its two largest members - Saudi Arabia and Iran - and may agree to boost output quotas without support from Iran, an OPEC delegate said.

OPEC wants to keep oil prices at around $25 a barrel, while responding to increased production requests from the United States, which represents one-fourth of world demand. Crude oil futures for April delivery are trading at $27.55 a barrel on the New York Mercantile Exchange.

The Energy Department estimates that OPEC members, excluding Iraq, must raise output to about 26 million barrels a day to bring crude prices back to $21, said Doug MacIntyre, a Department of Energy oil market analyst. That's 2 million above current actual production, and 3 million above OPEC's current target.

No Slowdown

So far, though, higher prices at the pump haven't deflated consumers' spending urges. Retail sales jumped 1.1% in February after a 0.4% increase in January, the Commerce Department reported this month. Sales increased 6.1% at industry leader Wal-Mart Stores Inc., 5.3% at Federated Department Stores Inc., and 6% at The Limited Inc., the biggest U.S. clothing merchant, industry figures showed.

Total consumer spending probably rose 0.8% last month, according to economists' forecasts in a Bloomberg News survey.

New car sales also surged in February. General Motors Corp. posted its best February U.S. auto sales in a dozen years, while Ford Motor Co. and DaimlerChrysler AG set records for the month.

Industrywide sales rose 11% as consumers took advantage of discounts and early tax refunds.

"As long as the labor market remains at historically tight levels and income growth remains solid, there is strong support for a continuation of healthy [confidence] figures," Mike Englund, chief economist at Standard & Poor's MMS in Belmont, Calif., said before the report was released. "Ongoing strength in confidence would support forecasts calling for consumption to remain solid well into 2000."

February's 4.1% unemployment rate was close to the 30-year low of 4% posted in January.

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