Consumer Confidence Drops to Lowest Level Since the Recession
Consumer confidence declined in October to the lowest level since March 2009, according to the Conference Board’s sentiment index, which decreased from a revised 46.4 reading in September, to 39.8 this month. With limited job availability keeping unemployment high, home values continuing to deteriorate, and European nations continually threatening to default on their sovereign debt, consumer sentiment has been taking a beating.
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“Dysfunctional labor and housing markets and the turmoil in Europe all are drags on confidence,” said Robert Dye, chief economist at Comerica Inc. in Dallas. “Consumers are fundamentally constrained, and consumer spending won’t be leading the economy forward.”
According to this morning’s Case-Shiller report, home prices in 20 major U.S. cities fell 3.8% in August from a year earlier, more than forecast. Falling home values are posing a “serious impediment to a stronger economic recovery,” according to Federal Reserve Bank of New York President William C. Dudley. “Continued house price declines could lead to even more defaults, foreclosures and distress sales, undermining wealth, confidence and spending,” said Dudley. “Breaking this vicious cycle is one of the most pressing issues facing policy makers.”
The Conference Board’s report shows a measure of present conditions decreased to an 11-month low of 26.3 from 33.3, while a measure of expectations for the next six months declined to 48.7, the lowest since March 2009, from 55.1. Only 3.4% of consumers said jobs were plentiful, the lowest since December, compared to 5.6% in September. Confidence declined in six of nine U.S. regions.
The percentage of respondents to the Conference Board’s survey who expect that more jobs will become available in the next six months dropped from 11.9 to 11.3. The proportion expecting their incomes to rise in that time declined from 13.5% to 10.3%, the weakest since October 2010. Of those surveyed 53.4% expect stocks to decline in the next year.