Image 01

Posts Tagged ‘Consumer Confidence Index’

Confidence Sharply Declines to 1983 Low as Unemployment Crisis Continues

Tuesday, February 23rd, 2010

US Consumers are feeling down according to new Consumer Confidence Board report released today that has rattled US stock markets

The Consumer Confidence Board issued very troubling findings today as consumer confidence fell sharply in February 2010 in one measure, the Present Situation Index, to levels not seen since February 1983:

The Conference Board Consumer Confidence Index®, which had increased in January, declined sharply in February. The Index now stands at 46.0 (1985=100), down from 56.5 in January. The Present Situation Index decreased to 19.4 from 25.2. The Expectations Index declined to 63.8 from 77.3 last month.

The Consumer Confidence Survey® is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world’s largest custom research company. The cutoff date for February’s preliminary results was February 17th.

Says Lynn Franco, Director of The Conference Board Consumer Research Center: “Consumer Confidence, which had been improving over the past few months, declined sharply in February. Concerns about current business conditions and the job market pushed the Present Situation Index down to its lowest level in 27 years (Feb. 1983, 17.5). Consumers’ short-term outlook also took a turn for the worse, with fewer consumers anticipating an improvement in business conditions and the job market over the next six months. Consumers also remain extremely pessimistic about their income prospects. This combination of earnings and job anxieties is likely to continue to curb spending.”

While the Present Situation Index fell to the 1983 low, the Consumer Confidence Index erased all gains since the spring of 2009:

Consumer Confidence Falls Sharply in February 2010

The fall in confidence is unsurprising as the toll of continued high unemployment, which now stands at 9.7% officially while unofficial figures run as high as 20%, on consumer spending remains a drag on the US economy as a whole. AP’s economics writer was uncharacteristically dire in reporting on the new figures:

NEW YORK (AP) — A monthly poll showed consumers’ confidence took a surprisingly sharp fall in February amid rising job worries. The decline ends three straight months of improvement and raises concerns about the economic recovery.

The Conference Board said Tuesday its Consumer Confidence Index fell almost 11 points to 46 in February, down from a revised 56.5 in January. Analysts were expecting only a slight decrease to 55.

The increasing pessimism is a big blow to hopes that consumer spending will power an economic recovery. Economists watch the confidence numbers closely because consumer spending accounts for about 70 percent of U.S. economic activity.

The February reading is a long way from what’s considered healthy
: A reading above 90 means the economy is on solid footing. Above 100 signals strong growth.

The US stock markets reacted unfavorably to the new confidence report, falling about 1% as of 2PM Eastern time, as “as a sharp drop in consumer confidence rattled the market.” The new report comes at a particularly inopportune time for the Obama Administration, as White House officials, including Obama and Biden, have been talking up the claimed economic “recovery” in recent weeks. Consumers, as shown by this report, apparently disagree with the Administration’s economic prognosis at this time, as do US manufacturers, who increased mass layoffs in January 2010 for the first time since last summer. Indeed, six in 10 of those categorized as “underemployed” have little confidence in finding new work, according to today’s Gallup survey. Continued reports such as today’s Consumer Confidence Board Report and today’s mass layoffs report may result in a renewed focus on economic policy on Capitol Hill as health care now occupies center stage.

UPDATE: The Financial Times notes that the severe winter weather may be playing a role in declining confidence in both Europe and the United States as a “raft of negative data in the US and Europe confounded analysts’ predictions and halted gains in equity markets.”

Technorati Tags: , , , , , , , , , , , , , , , , , , ,