The Index of Consumer Sentiment was unchanged in March from the February survey and nearly identical to the level recorded six months ago. Following the sizable gains recorded from the recession lows set more than a year ago, confidence has moved sidewards with only small variations during the past six months. Consum-ers reported gains in the overall economy and expected the economy to continue to improve during the year ahead. Despite these expected gains in the economy, consumers’ evaluations of their own financial situation have re-mained grim due to the widespread expectation that improvement in their job and income prospects will be very small during the year ahead.

Divergence Between National and Personal Economic Prospects
Consumers continued to report improvement in the economy, and expected the economy to improve by more than a two-to-one margin in the year ahead. One-in-four consumers reported hearing news of job gains in March, up from less than one-in-twenty a year ago. To be sure, consumers are still convinced that over the next five years some economic setbacks will occur rather than uninterrupted economic growth. And the pace of eco-nomic growth is still anticipated to be slow, with the unemployment rate expected to post only marginal declines in the year ahead. While the financial situation of consumers did improve slightly in March, the overall judg-ments of consumers remained quite grim—45% reported that their finances had worsened, down from 55% last year, and just 22% reported improvement, only marginally above last year’s 19%. More than one-in-three re-ported income declines, and 55% expected no income gains during the year ahead. These concerns have made their buying decisions contingent on the availability of price discounts, with vehicle sales benefiting in March.

The Consumer Sentiment Index was equal to last month’s reading and nearly identical to the 73.5 recorded in September, but was 28% above last March’s reading. While the initial gain from the cyclical low was rapid, confidence has languished at those improved levels during the past six months. Gains in the Index of Current Economic Condi-tions (+12.3%) have offset some erosion in the Consumer Ex-pectations Index (-7.6%) during the past six months.

Consumers anticipated the economy to improve but nonetheless expected their own personal financial situation to remain unfavorable during the year ahead. This situation is not unusual. It simply indicates that expectations about the economy change more eas-ily and earlier than people’s evaluations of their finances. Closing this gap, however, will take longer than in the past given that very small gains in jobs and incomes are anticipated in the balance of 2010. Overall, the data indicate that inflation adjusted personal consumption expenditures can be expected to increase by 1.9% in 2010.