Consumers turned gloomy in March as rising energy prices ignite inflation fears, a change in mood that could clove global economic growth. Another report on Tuesday showed house prices fell for the seventh consecutive month in January, but remained above the housing bust after April 2009.
The report added to signs the U.S. economy lost momentum in early 2011, although the impact of energy prices - exacerbated by disturbances in Eastern countries - is likely to be temporary, economists said.
They point to an improving labor market and that growth is based.
"It's likely looking at a pattern of" two steps forward, one step back "in terms of the collective mood, taking into account the sources of uncertainty and risk will not be easy to solve," said Jim Baird, a partner Plante Moran Financial Advisors Kalamazoo, Michigan.
The Conference Board, an industry group said its index of consumer sentiment fell to 63.4 in March, after hitting a three-year 72.0 in February. The March reading was below economists' expectations of a drop in 65.0.
Rising gasoline prices, driven by instability in the Middle East and North Africa are eroding consumer confidence and rising inflation expectations. A separate survey last week showed the moral of households in the lowest level in more than one year.
The Conference Board found that price expectations than a year rose to its highest level since October 2008.
Economists said the jump in inflation expectations were unlikely to trouble the Fed, which has the pressure on commodity prices to be temporary. Core inflation, which excludes the cost of food and energy, not far from recent lows.
In Germany, concerns about the global economy and inflation driving down consumer confidence for the first time in 10 months.
U.S. financial markets moved slightly to the data.
Losing a little boost?
The weaker the U.S. Trust survey reached the heels of Monday's numbers showed that consumer spending, adjusted for inflation, rose only modestly in February, pointing to a slowdown in economic growth in the first quarter.
"It makes me think that consumer spending is already up to half the growth rate in the first quarter as it did in the fourth quarter," said Christopher Low, chief economist at FTN Financial in New York.
Hiccups can be seen in growth comes as policy makers at the Fed slide of a debate over whether the economy is strong enough for the central bank to reduce its massive stimulus program.
The head of the St. Louis Fed, James Bullard said the U.S. central bank could reduce its purchases of bonds by $ 100 million before the scheduled expiry in June. His tone contrasted with other senior Fed officials, who said Monday that the economy still needs the full program of 600 billion U.S. dollars of support.
Bullard, a non-voting member of the Policy Committee, is not seen as representing the consensus at the Fed, which is supporting the facilitation program to see through. However, another Fed official, president of the Dallas Fed Richard Fisher, Bullard echoed skepticism about relaxation, and said he would use his vote in the panel this year to oppose any effort to expand.
markets jittery, nervous about a rise in inflation and the likelihood of other major central banks tighten policy in response to disturbing signs of price pressures are on high alert for any evidence that the Fed could reverse course and took their cues from the more hawkish Fed commentary.
The dollar rose against the yen and against a basket of major currencies after Fisher's remarks during a television interview late Fox Business.
The S & P / Case-Shiller composite index of home prices in 20 cities fell 0.2 percent in January from December. The decline was less severe than the expectations of a fall of 0.4 percent, but economists say that an oversupply of housing foreclosures home values remain depressed for a while.
Compared with a year ago, prices fell 3.1 percent.
Sinking housing prices are not derail the economy on account of housing only 2.3 percent of gross domestic product.
The economists also see a limited impact on the U.S. economy since the March 11 earthquake and devastating tsunami in Japan. Some companies have been forced to cut production at U.S. plants due to shortage of key parts or components imported from Japan.
"There was already a great change in sentiment before the earthquake," said Harm Bandholz, chief U.S. economist UniCredit Research in New York.
"The U.S. economy is mainly services. About 6.5 percent of cars sold in the U.S. are manufactured in Japan and only 5 percent of parts used in U.S. cars imported from Japan. "
