NEW YORK — Consumer confidence plummeted in June to its lowest level in 16 years amid growing concerns about high prices, falling home values and a tighter job market.
This story first appeared in the June 25, 2008 issue of WWD. Subscribe Today.
The Conference Board’s monthly Consumer Confidence Index is now at 50.4, down from 58.1 in May. The two key components both fell in June, the Present Situation Index to 64.5 from 74.2, and, reaching an all-time low, the Expectations Index to 41 from 47.3.
UBS chief economist Maury Harris said the index, a key measure of consumer economic sentiment, is “now much weaker than the lows during the 2001 and the 1990-1991 recessions. It looks more than low enough to be consistent with the contraction in real consumption.”
The index fell as low as 70.7 during the 2001 contraction and to 55.3 during the 1990-1991 slump.
“This month’s Consumer Confidence Index is the fifth-lowest reading ever,” said Lynn Franco, director of The Conference Board’s Consumer Research Center. “Consumers’ assessment of present-day conditions continues to grow more negative and suggests the economy remains stuck in low gear.”
Franco added that the lowest-ever reading for the Expectations Index mirrored the bleak economic outlook of consumers. However, she noted the low readings in June could signal consumer confidence is nearing a bottom.
The index has now fallen nearly 55 percent from its July 2007 reading of 111.9.
Respondents’ views of business conditions eroded significantly. Those who claimed business conditions are “bad” rose to 32.5 percent from 29.7 percent, while those who said business conditions are “good” fell to 11.5 percent from 13 percent last month. The respondents who said jobs are “hard to get” inched up to 30.5 percent from 28.3 percent in May, while those who claimed jobs are “plentiful” decreased to 14.1 percent from 16.1 percent.
Expectations for the next six months also took a turn for the worse, with the percentage of consumers expecting fewer jobs in the months ahead rising to 35.5 from 32.3, and those anticipating more jobs down to 8 from 9. The portion of consumers expecting their incomes to increase declined to 12.3 percent from 14.1 percent.
The drop reported Tuesday in consumer confidence, along with a record decline in home prices, helped push stocks down. The Dow Jones Industrial Average, the Standard & Poor’s 500 and the S&P Retail Index were all down 0.3 percent, although retail stocks remained in positive territory until the end of the trading session.