Consumer Confidence Darkens Further in January
ANNE D'INNOCENZIO | 1/27/2009, 1:35 p.m.
NEW YORK (AP) -- Americans' mood about the economy darkened further in January, sending a widely watched barometer of consumer sentiment to a new low, a private research group said Tue. Jan. 27, as people worry about their jobs and watch their retirement funds dwindle.
The Conference Board said its Consumer Confidence Index edged down to 37.7 from a revised 38.6 in December, lower than the reading of 39 that economists surveyed by Thomson Reuters had expected. In recent months the index has hit its lowest troughs since it began in 1967, and is hovering at less than half its level of January 2007, when it was 87.3.
"It appears that consumers have begun the new year with the same degree of pessimism that they exhibited in the final months of 2008," Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement. "Looking ahead, consumers remain quite pessimistic about the state of the economy and about their earnings."
The Present Situation Index, which measures how shoppers feel now about the economy, declined slightly to 29.9 from 30.2 last month. The Expectations Index, which measures shoppers' outlook over the next six months, decreased to 43.0 from 44.2. Franco added that until she sees considerable improvement in shoppers' outlook for the economy, she can't say that "the worst of times are behind us."
The downbeat report prompted Wall Street to give up an early advance. The Dow Jones industrial average was down 17 points at 8,098 after being up as much as 85 points.
Economists closely watch consumer confidence since consumer spending accounts for more than two-thirds of economic activity. But the latest signs of a nervous consumer spur fresh alarm about the economy and the health of the retail industry, which is struggling with the most severe spending retrenchment in decades.
Stores limped through the weakest holiday period since at least 1969, according to the International Council of Shopping Centers. And retail sales appear to be only deteriorating in January as shoppers continue to be whipsawed by massive layoffs across all sectors of the economy. The unemployment rate, now at a 16-year high of 7.2 percent, could hit 10 percent or higher later this year or early next year, according to some analysts' projections.
Several big companies announced layoffs Mon. Jan. 26, sending thousands more to the unemployment lines. Drugmaker Pfizer Inc., which is buying Wyeth in a $68 billion deal, and Sprint Nextel Corp., the country's third-largest wireless provider, each plan to slash 8,000 jobs. Home Depot Inc. is shedding 7,000 jobs, and General Motors Corp. said it will cut 2,000 more jobs. Caterpillar Inc., the world's largest maker of mining and construction equipment, announced 5,000 new layoffs on top of several earlier actions.
Meanwhile, a report on home prices released Tuesday offered more bad news about the slumping housing market. The Standard & Poor's/Case-Shiller 20-city housing index showed home prices dropped by 18.2 percent in November, the sharpest annual rate on record.
The Consumer Confidence survey - derived from responses received through Jan. 21 of a representative sample of 5,000 U.S. households - showed that consumers' overall assessment of current conditions remain pessimistic. Those saying that business conditions are "bad" increased to 47.9 percent from 45.8 percent, while those saying they are "good" declined to 6.4 percent from 7.7 percent last month.
Consumers' short-term outlook also remains gloomy. Those expecting business conditions to worsen over the next six months decreased slightly to 31.1 percent from 32.9 percent, while those anticipating conditions to improve was little changed at 13.3 percent in January, compared with 13.4 percent in December.