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Consumer Confidence Has Biggest Drop Since October 2011

The Consumer Confidence Index, which fell in May after falling in April, is now at 64.9.

U.S. consumers are worried.

The Conference Board’s Consumer Confidence Index in May declined for the third-straight month and suffered its biggest drop since October 2011, falling to 64.9.

The index’s high for the year was in February when it was 71.6, and the consensus among economists for May was that the index would tick back up to 70 from April’s 68.7. Consumers, however, showed anxiety about the jobs front. The Labor Department will release employment figures for May on Friday, and the jobless rate is expected to remain at 8.1 percent.

 

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The two components of the index each declined. The Present Situation Index fell to 45.9 from 51.2 last month. The Expectations Index, which measures consumers’ outlook six months out, declined to 77.6 from 80.4.

Lynn Franco, director of the economic indicators at The Conference Board, said, “Consumers were less positive about current business and labor market conditions, and they were more pessimistic about the short-term outlook.”

The chief concern is the labor front. Consumers who said they expect more jobs in the months ahead fell to 15.8 percent from 16.9 percent. Those who anticipate fewer jobs rose to 21 percent from 18.4 percent.

Chris G. Christopher Jr., senior principal economist at IHS Global Insight, said, “Consumer confidence remains well within recession territory as more respondents of the survey think that their current and future employment prospects are significantly dimmer.”

He noted that “consumers face too many headwinds such as high debt burdens, depressed home prices, a lack of confidence in the government’s ability to make things better, volatile equity markets, and rising student loan balances.”

Even with the downbeat U.S. report on consumer confidence, global equity markets stayed in positive territory, with the major indices ending Tuesday’s trading sessions up.

In Asia, research notes from Hong Kong-based financial analysts said that China could be readying a new stimulus package helped to fuel market gains. The Nikkei 225 rose 0.7 percent to 8,657.08, while the Hang Seng Index gained 1.4 percent to 19,055.46. Luxury firm Prada SpA, which trades on the Hong Kong exchange, rose 5.6 percent to $6.27.

Europe’s markets gained ground at the close of trading on Tuesday, still on a high from polls in Greece that showed growing support for pro-bailout parties. A second round of Greek elections is set for June 17.

The CAC 40 in Paris led the way, gaining 1.4 percent to close at 3,084.70, followed by the DAX in Frankfurt, which was up 1.2 percent to 6,396.84. The FTSE 100 in London was up 0.7 percent to 5,391.14, while the FTSE MIB in Milan advanced 0.4 percent to 13,107.13.

European luxury stocks were mostly on the upswing, with the day’s biggest gainers including Geox, which was up 5.7 percent to $2.09; Safilo Group, which advanced 5.1 percent to $6.16, and Luxottica Group, which advanced 4.1 percent to $33.94. All conversions to U.S. dollars are at current exchange.

In the U.S., the Dow Jones Industrial Average rose 1 percent to 12,580.69, while the S&P Retail Index also was up 1 percent to 613.45.

Shares of Facebook Inc. ended the trading session down 9.6 percent to $28.84, below $30 for the first time since going public on May 18 when it closed its first day of trading at $38.23. The social media site, which raised $16 billion when it went public, at the time had a valuation of $104 billion. That valuation has since fallen to $78.4 billion.

Among the top retail stocks were The Bon-Ton Stores Inc., up 18.2 percent to $4.75; Pacific Sunwear of California Inc., up 8.9 percent to $1.47; The Wet Seal Inc., up 4.2 percent to $2.97; New York & Company Inc., up 3.8 percent to $3.54, and Macy’s Inc. up 3.3 percent to $38.99.