The impact of higher payroll taxes hurt consumer confidence in January, causing it to drop to its lowest level since November 2011.
The Conference Board, which tracks its own Consumer Confidence Index each month, said the gauge fell 8.1 points, to 58.6, from last month’s reading of 66.7. That’s a decline for three straight months since hitting a five-year high of 73.1 in October 2012. Economists were generally expecting a slight dip to 65.
Of the two components of the index, the present situation portion fell to 57.3 from 64.6 last month, while the expectations section decreased to 59.5 from 68.1.
Lynn Franco, director of economic indicators at The Conference Board, said, “Consumer confidence posted another sharp decline in January, erasing all of the gains made through 2012. Consumers are more pessimistic about the economic outlook and, in particular, their financial situation.” She said it might take a while for confidence to rebound and consumers to recover from their initial paycheck shock.
Senior principal economist Chris G. Christopher Jr. at IHS Global Insight said, “Consumer confidence is digging deeper into a ditch. Today’s report signifies a major deterioration of confidence.”
He call this month’s reading a “superbad report,” explaining, “One of the main culprits for the dismal confidence readings is that Americans remain concerned about the debt ceiling despite having avoided going over the fiscal cliff.”
Consumers’ outlook on the jobs front also continued to deteriorate — those who said jobs are plentiful fell to 8.6 percent from 10.8 percent last month, while respondents who anticipate more jobs six months ahead fell to 14.3 percent from 17.9 percent last month.