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The index fell to 71.8 from last month's 77.6 reading.
Economists expected the index to rise to 78.0, but a weak IBD/TIPP Economic Optimism Index reading last week foreshadowed the drop in today's release.
The economic conditions sub-index fell to 87.5 from 89.0 in February.
The economic outlook sub-index fell to 61.7 from 70.2 last month.
Inflation expectations 1 year ahead were unchanged at 3.3 percent, while inflation expectations 5 years ahead ticked down to 2.9 percent from 3.0 percent last month.