Consumer confidence drops to record low
Issued on: Modified:
According to official data for the month of January, consumer confidence dropped to 37.7 per cent in the United States, beating a previous record set in December.
AFP - US consumers greeted the new year with historically low confidence as the economy struggled in recession, and the outlook remains "quite pessimistic," a survey showed Tuesday.
The Conference Board said its consumer confidence index tumbled to 37.7 in January, eclipsing the prior record low of 38.6 in December.
The January reading overturned most analysts' forecasts of a gain to 39.0.
It was the second straight monthly decline and the lowest confidence reading since the private research firm began tracking the data in 1967.
Consumers, beset with rising unemployment and tight credit conditions as the world's largest economy entered a second year of recession, grew more anxious about the coming months, the survey found.
But there was a glimmer of hope for the labor market as the number of consumers seeing more jobs available increased for the first time in a year.
The survey's cutoff date was January 21, the day after President Barack Obama took office pledging to make reviving the economy and combating the worst financial crisis since the Great Depression his top priority.
"Consumers have begun the new year with the same degree of pessimism that they exhibited in the final months of 2008," Lynn Franco, research director at the Conference Board, said in a statement.
Franco noted that the present situation index remained little changed, falling to 29.9 from 30.2 last month, suggesting that economic conditions had not deteriorated substantially in January.
Yet improvement was seen in the labor market. Those saying jobs were "hard to get" edged down to 41.1 percent from 41.5 percent, while those saying they were "plentiful" climbed to 7.2 percent from 6.5 percent.
The latter had declined steadily from 23.8 percent in January 2008.
The expectations index, measuring the outlook for the next six months, fell to 43.0 from 44.2 in December, with a sharp drop in those expecting their incomes to increase, to 10.0 percent from 12.7 percent.
"Looking ahead, consumers remain quite pessimistic about the state of the economy and about their earnings. And, until we begin to see considerable improvements in the expectations index, we can't say that the worst of times are behind us," Franco said.
That bodes ill for economic recovery, with consumer spending normally representing two-thirds of economic activity.
The report highlighted the depths of the economic problems Obama is trying to address with an 825-billion-dollar economic stimulus plan.
The president, who took office a week ago, was meeting with Republican lawmakers on Capitol Hill to try to garner opposition votes in hopes of having the legislation ready for his signature before February 16.
Ian Shepherdson, chief US economist at High Frequency Economics, said that the expectations index at a record low was "consistent, we reckon, with real consumers' spending falling by about 3.0 percent year-over-year, a catastrophic rate of decline."
John Ryding at RDQ Economics latched on to the uptick in employment confidence.
"For an economy to recover, it has to stop getting worse and this is one small signal that consumers see the labor market as just a little bit less weak in January than in December," he said.
"We need to see a lot more readings like this ... where the levels -- though still indicating contraction -- suggest that the rate of contraction is slowing."
Daily newsletterReceive essential international news every morningSubscribe