Another month, another new low for the public’s assessment of the economy.
For the second consecutive month, consumer confidence hit a historic low as fears about rising job losses and falling home values stoked pessimism.
The Conference Board Consumer Confidence Index declined to 37.7 in January from 38.6 in December.
Both components of the Index declined in January, with the Present Situation portion dipping to 29.9 from 30.2 and the Expectations part decreasing to 43 from 44.2.
“It appears that consumers have begun the new year with the same degree of pessimism that they exhibited in the final months of 2008,” said Lynn Franco, director of The Conference Board Consumer Research Center.
Looking six months ahead, she said 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.”
A separate housing report by S&P/Case Shiller said Tuesday that home prices plummeted by 18.2 percent in November from a year ago.
According to the Conference Board’s January survey, consumers’ short-term outlook remained negative, with those who expect business conditions to worsen over the next six months decreasing slightly to 31.1 percent from 32.9 percent last month. Respondents who anticipate conditions will improve remained essentially unchanged at 13.3 percent compared with 13.4 percent in December.
Consumers’ views of the labor picture were mixed, with those who expect fewer jobs in the months ahead declining to 36.7 percent from 40.6 percent, and those who foresee more jobs sliding to 9.4 percent from 9.8 percent last month.
There’s likely a “couple more quarters of weakness” before consumer spending improves, said Conrad DeQuadros, senior economist at RDQ Economics.
“The job situation needs some stability,” he said. “It’s not just about losing one’s job, but also the fear of losing one’s job that also has consumers holding back on spending.”
DeQuadros added that consumers over the past 10 years have been saving through equity price appreciation, relying mostly on the value of their homes. He expects the savings rate to rise to 5 percent near the end of the year, up from the current rate of 2 percent.
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