In a decidedly downbeat week for the markets, the U.S. trade deficit and jobless claims rose, and the consumer sentiment index plunged 9.3 points to a far worse than expected 68.2 in March (preliminary), as surging gas prices weighed on Americans' mood.

The consensus of economists surveyed by Bloomberg had been that the preliminary March consumer sentiment reading would dip to 76.5 from 77.5 in February, after rising from 74.2 in January, 74.5 in December, 71.6 in November, and 67.7 in October. in December 2007, at the start of the Great Recession, the index stood at 88.9, and it hit a recent low of 55.3 in November 2008, during the acute stage of the financial crisis.

The consumer sentiment report closed out a disappointing week for the economy. Consumer credit did rise $5 billion in January, but the U.S. trade deficit surged by $6 billion to $46.3 billion in January, pushed up by a higher imported oil bill. Meanwhile, initial jobless claims rose a worse than expected 26,000 to 397,000.

Labor Market, Inflation Trends

Mike Englund, chief economist for Action Economics in Boulder, Colo., said even though jobless claims rose this week, he sees good things for job seekers in the longer-term downward trend in claims that pushed the metric below the psychologically significant 400,000 level this winter.

"We're just giving back the distortions from the holiday in the prior week," Englund told Bloomberg News. "It does appear that tightening in the labor market gained a little steam."

Returning to the consumer sentiment report, the current economic conditions component declined to 83.6 in March from 86.9 in February. In addition, the consumer expectations component plunged to 58.3 from 71.6 in February -- its lowest level since March 2009.

Consumers' outlook on inflation grew more pessimistic in March. The 1-year inflation outlook jumped to 4.6% from 3.4% in February; the 5-year inflation outlook rose to 3.2% from 2.9%.

Economists, business executives, and policy makers monitor consumer sentiment because, historically, consumer attitudes have been correlated with consumer decisions to spend. In general, rising consumer sentiment leads to increases in consumer spending, or the maintenance of a level of spending, while falling consumer sentiment presages a drop in spending. And historically, consumer spending has accounted for 65% to 70% of U.S. GDP.

High Oil Prices Sour Sentiment

In general, consumers are feeling better about the economy than they were a year ago, largely due to signs that the major period of layoffs appears to be over, and also due to reports of continued, better than expected corporate quarterly earnings.

However, as the March sentiment survey indicated, the sharp rise in gasoline prices to more than $3.52 per gallon for regular unleaded has put Americans in a more subdued mood as spring approaches. The reason is obvious enough: High gas prices reduce consumers' disposable income and also increase businesses' operating costs -- two key components of the U.S. economy.

However, while the oil and gas price spikes are large, investors shouldn't overact. If the price of oil, currently about $101 per barrel, moderates to $85 to $90, the negative impact on the U.S. economy will be modest, perhaps as small as a 0.1 or 0.2 percentage point decline in GDP for 2011.

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Anwar Alaska and Colorado have more oil reserves than the entire middle east, and O'blamer set the drilling regulations so tight for the Gulf , that only one new well just recently got started there.

Mean while , all the other countrys have been drilling non stop this entire time in the Gulf. Now where are the crazy wacked out Liberal 18% minority that blamed Bush when gas hit 2.50 or more a gallon when its now over 5.00 on both coasts...and headed to at lest 6.00? Liberals are the kings of lies , hate , as well as hypocrosy.

March 13 2011 at 5:28 PM Report abuse +3 rate up rate down Reply
1 reply to consurvative's comment

You mean the same Liberals that ignored Clinton signing NAFTA into law? The same Liberals that are saying squat about the exact same fleecing of our jobs deal that Oboma is currently working on with South Korea?

The same Liberals who would rather bite their pillows than admit the Dems put us in this Depression starting when the took control of both Houses in 2006 , and failed to stop their campaign to push sub prime mortgages...saying this wasn't a , and that the bubble could never burst.....those Liberals?

March 13 2011 at 5:36 PM Report abuse +3 rate up rate down Reply


March 12 2011 at 9:55 PM Report abuse +3 rate up rate down Reply
1 reply to thisisdavid88's comment

For 8 years the Bush administration ( oil people) sat on their hands and did nothing to encourage alternative energy sources.

March 12 2011 at 11:22 AM Report abuse -1 rate up rate down Reply
4 replies to amfnvf's comment

This is news? What did they expect? People (defined the low middle class to upper middle class) are out of work, worried about their jobs even if working, pretty much broke (no real cash flow), struggling to buy life necessities and waiting for the sun to come up with the next disaster du jour. this is about
80% of the folks out there. the rich are not impacted much, the poor are just still poor. i don't play the blame game. it has been 25-30 years of malfeasance, politics, and gamesmanship by both parties and a mulitude of presidents from each party. to try to pin current events on a particular party or president is unreasonable and unfair.

March 12 2011 at 10:34 AM Report abuse +1 rate up rate down Reply

Myopic syncophant logic: If a Republican is POTUS and gas prices rise, it is because a Republican is POTUS. If a Democrat is POTUS and gas prices rise, it is because once upon a time a Republican was POTUS. Now all together, bleat in unison.

March 12 2011 at 10:31 AM Report abuse +4 rate up rate down Reply

Even before this last record run up of gasoline prices the last two weeks, the price of gas has been near twice as much as it was the day Bush left office. The average price of gasoline in the U.S. on that day was $1.61/gallon.

Of course CNN, NBC, CBS, ABC, AP and the New Youk Times haven't been hammering Obama every day like they did Bush in 2008.

Obama has gone on record saying he wanted "Europen style gas prices". Folks, prices in Europe are the equivalent of $6 - 7 per gallon. Get yourself ready.

March 12 2011 at 7:38 AM Report abuse +5 rate up rate down Reply
1 reply to remadden's comment

not a record yet. have to get to $4 gal to break the previous record.

March 12 2011 at 10:37 AM Report abuse rate up rate down Reply

Better blame Bush for these high gas prices - oh, that's right, he's not in office anymore. Let's see - then by the lefties logic Pres. Obummer is the culprit. But wait - no one is blaming him for this increase in gas prices like they did to Bush - why not ?? Could it be that the lefties and uninformed are hippocrites ??

March 12 2011 at 7:26 AM Report abuse +8 rate up rate down Reply
1 reply to ajallenky's comment

blame is useless. neither bush (when it got to $4 on his watch) or obama can have much impact on world oil prices, the word "world" emphasized. as to drill baby drill rhetoric, obama was faced with the BP fiasco and nobody could climb on the drill baby drill train at that point. Maybe a better question to ask is why, between 2000-2006 with a gop prez and gop congress, were we not in a drill baby drill mode?

March 12 2011 at 10:44 AM Report abuse -2 rate up rate down Reply

hold you bought off elected reps in the House ACCOUNTABLE. All laws of the land START IN THE HOUSE OF REPS.

March 12 2011 at 7:20 AM Report abuse rate up rate down Reply
1 reply to k4jlp's comment

Where Barney Frank sits

March 12 2011 at 7:40 AM Report abuse +4 rate up rate down Reply

Cannot blame President Obama for the oil prices. The oil companies and the republicans are in bed with each other. The oil companies are not scared of the democrats for the republicans have taken control of the house and the oil companies are happy. So our gas prices will keep going up as they did under the bush administration. Keep voting republican and we will keep loosing more and more jobs.

March 12 2011 at 6:56 AM Report abuse -5 rate up rate down Reply

Obama is completely at fault for the rise in gas prices...we have plenty of oil under our own lands -- but he will not allow drilling - one permit issued and all the rigs have left the Gulf...thousands laid off;entire area depressed all thanks to the socialist in the White House...he wants gas prices to go up -- perhaps we can all attach a wind machine to our cars and hope they run. Electric cars will not succeed because the price of electicity is going way up - we have few nuclear power plants - and you can thank Mr. Obama for this--gas will go up to $6.00 a gallon -- fire Obama and his cronies in 2012.

March 12 2011 at 4:03 AM Report abuse +8 rate up rate down Reply