CONSUMER CONFIDENCE FALTERS
Byline: Jennifer Weitzman
NEW YORK — After rebounding in March, consumer confidence plunged nearly 8 points in April as consumers became increasingly apprehensive about the economy, job security and the prospects for economic stabilization.
The Consumer Confidence Index fell 6.6 percent to 109.2, matching its 4.6-year low hit in February and representative of its sixth tumble in seven months. It stood at 116.9 in March.
“Deteriorating business conditions and a less favorable job market are the two critical reasons for the latest decline in confidence,” said Lynn Franco, director of The Conference Board’s Consumer Research Center. “It’s clear that consumers have begun to worry about employment trends and these concerns are gnawing away at consumer confidence.”
The biggest decline in the monthly report came in its reading of consumer’s assessment of current business conditions. The Present Situation Index — which measures current consumer sentiment — fell to 155.6 in April from 167.5 in March.
The percentage of consumers who rated current business conditions as “good” declined to 27.9 from 33. Consumers rating conditions as “bad” increased to 13.3 percent from 10.8 percent. Consumers claiming jobs were “hard to get” rose to 14.2 percent from 12.6 percent. Those reporting jobs were plentiful fell to 40 percent from 43.8 percent.
The Expectations Index — a measure of consumer sentiment for the short term — fell to 78.2 from 83.1. Those expecting an improvement in business conditions dipped to 14.1 percent from 15.1 percent while consumers anticipating worsening conditions increased to 14.7 percent from 13.7 percent.
The longer-term employment outlook has also turned sour. Some 23.2 percent of consumers expect fewer jobs to become available over the next six months, up from 20.4 percent. Those expecting more jobs to become available remained virtually unchanged at 12.3 percent. Income expectations also declined to 22.1 percent expecting a bump in their paychecks from 23.4 percent.
Moody’s Investors Services economist John Lonski said that this month’s reading served as a warning sign the economy is not in great shape, but added its level is not weak by historical standards.
However, the economist expressed concern that the Index is detecting a rise in unemployment that has yet to be reported by the government. He pointed out that April’s results closely resemble those in the second half of 1996, when the Index averaged 110.3 percent and when unemployment was 5.3 percent, well above today’s 4.3 percent.
“Consumers are very fearful of their employment prospects and, as a result, are spending more cautiously,” Lonski said, adding that the drop reflects a weaker labor market, which, as a consequence “has put us on guard for a slower pace of consumer spending.”
Lonski said he does not see any further deterioration in consumer confidence in the second half. In addition to benefits from a tax and rate cuts, he said sales have been trending at or above plan so far in April. If that continues, new orders for consumer goods would increase, a steadier job market would ensue and confidence would follow.
The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The index compares results to its base year, 1985, when it stood at 100 and is considered a key measurement of consumer spending, which comprises two-thirds of the nation’s economy.
The equity markets remained in check as investors await an expected one-half percent cut when they meet again May. 15.