NEW YORK – Confidence among U.S. consumers this month fell to its lowest level ever, defying expectations of a continued rebound from October’s record low, according to preliminary December figures released today by The Conference Board.
The private research group’s Consumer Confidence Index tumbled to 38 points (1985 = 100) – a decline of 6.7 points, or 14.99 percent, from November’s final reading of 44.7 – instead of continuing last month’s recovery from a final October reading of 38.8 points that until now had been the lowest since record-keeping began in 1967. (READ MORE)
“The further erosion of the Consumer Confidence Index reflects the rapid and steep deterioration of economic conditions that occurred in the fourth quarter,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement. A year ago, the CCI had risen to a final December reading of 90.6 points before resuming a decline that stretched back to July 2007. (READ MORE)
This month, analysts had expected the nationwide index would rise to 45.5 points – from the preliminary November reading of 44.9 – buoyed by falling energy costs, based on the median forecast from a survey of 50 economists by Bloomberg News. (Their estimates of the December CCI ranged from 51.1 to 40 points.) Instead, consumers’ worries about the job market and the continuing financial turmoil outweighed any gain from the decline in gasoline prices, which are down 60 percent from their highs this July.
“The Present Situation Index is now close to levels last seen in the months following the 1990-91 recession, but is not as low as levels reached during the 1981-82 recession,” Franco said. “Declines in the Expectations Index appear to be moderating, but this index continues to hover at historical lows,” she added.
The Present Situation Index – reflecting consumers’ views of current conditions – “plummeted to 29.4 from 42.3 last month,” the research group said, as “consumers’ appraisal of current conditions grew substantially worse in December.”
The share of respondents seeing business conditions as bad rose to 46.0 percent from November’s 40.6 percent, while the share saying conditions are good fell to 7.7 percent from last month’s 10.1 percent. The share seeing jobs as hard to get rose to 42.0 percent from November’s 37.1, while the share seeing them as plentiful dropped to 6.2 percent from the previous 8.7 percent.
The Expectations Index – a gauge of consumer hopes and fears for the economy over the next six months – “was only moderately more pessimistic,” the board said, falling to 43.8 points this month from 46.2 in November.
The share of respondents expecting their incomes to rise in the next half-year fell to 12.7 percent from the previous 13.1 percent. The business-conditions outlook was mixed, with an improvement expected by 13.4 percent, up from November’s 11.5 percent, while a worsening was predicted by 32.8 percent, up from last month’s 28.3 percent.
“Both subindexes bear careful watching over the next several months, to see if they are starting to show signs of approaching a bottom,” Franco said. “In the meantime, however, the overall economic outlook remains quite dismal for the first half of 2009, and only a modest recovery is expected in the second half.”
The indexes are based on a monthly survey conducted for The Conference Board by custom research firm TNS. The cutoff date for this month’s preliminary results was Dec. 22.
“The deterioration going on right now in the labor market made people feel much worse,” Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Mass., told Bloomberg News. The jobless rate nationwide rose to 6.7 percent in November, while the Massachusetts rate rose to 5.9 percent and Rhode Island held steady at 9.3 percent. (READ MORE)
“If people are worried about their jobs, they are not going to spend,” Gault said. “That is extremely negative.” The U.S. retail industry already is reeling after a holiday shopping season the International Council of Shopping Centers is calling the worst in at least four decades. (READ MORE)
The Conference Board is a nonpartisan, nonprofit business membership and research organization with offices in New York City, Chicago and abroad. Additional information, including the latest Consumer Confidence report, is available at www.Conference-Board.org.
