The University of Michigan consumer sentiment index is revised down to 62.0 in the final report for March after 63.4 in the preliminary data. The index is below 67.0 in February and the lowest in three months. The final March reading is at the low end of the forecast range in an Econoday survey and below the consensus of 63.4.

The component for current conditions is down 4.4 points to 66.3 in March from 70.7 in February and little changed from 66.4 in the preliminary report. The six-month expectations index which accounts for about 60 percent of the total index is down 5.5 points to 59.2 in March after 64.7 in February, and is revised over 2 points down from the preliminary 61.5.

Consumers continue to worry about the economic outlook and are less confident that a recession can be avoided. The job market and inflation remain particularly worrisome for households that earn less.

At least in the present, inflation expectations have improved. The 1-year inflation expectations measure is down to 3.6 percent in March after 4.1 percent in February and is the lowest since 3.4 percent in April 2021. Households have gotten some relief on food and gas prices. The 5-year inflation expectations measure remains at 2.9 percent for the fourth month in a row in March. While off the near-term peak of 3.1 percent in June 2022, it appears that inflation expectations for the medium-term are sticking above the Fed's 2 percent target.

Consumer sentiment is expected to end March unchanged from the mid-month flash of 63.4.

The University of Michigan's Consumer Survey Center questions households each month on their assessment of current conditions and expectations of future conditions. Preliminary estimates for a month are released at mid-month and are based on about 420 respondents. Final estimates are released near the end of the month and are based on about 600 respondents.

The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

This balance was achieved through much of the nineties and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer sentiment index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.

Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.