Consumer Confidence Gets Whacked…Again
Despite a delay in the fiscal cliff, consumer confidence in the United States took another plunge in January to reach its lowest level in more than a year.
After a sharp decline in December, The Conference Board Consumer Confidence Index fell further in January. The index of consumer attitudes dropped to 58.6, compared to an upwardly revised 66.7 last month. It was the lowest reading since November 2011 and the worst month-over-month decline since August 2011, when Washington D.C. caused pessimism with its bickering over the debt ceiling.
The January reading was well below the median estimate of 64 in a Bloomberg survey of 73 economists. In fact, every prediction in the survey was higher than the 58.6 reading.
The fiscal cliff, a combination of tax cuts expiring and a reduction in government spending, is taking the majority of the blame for the weak consumer sentiment, as the majority of Americans took a hit on their paychecks…
Lynn Franco, Director of Economic Indicators at The Conference Board, explains, “Consumer Confidence posted another sharp decline in January, erasing all of the gains made through 2012. Consumers are more pessimistic about the economic outlook and, in particular, their financial situation. The increase in the payroll tax has undoubtedly dampened consumers’ spirits and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock.”
Other sentiment gauges provided by The Conference Board also showed weakness. The number of people claiming business conditions are “good” dropped to 16.7 percent, compared to 17.2 percent in the prior month. At the same time, those saying business conditions are “bad” increased to 27.4 percent from 26.3 percent.
Labor market conditions are also weighing on consumers. People saying jobs are “plentiful” declined to 8.6 percent, compared to 10.8 percent. Those claiming jobs are “hard to get” increased to 37.7 percent from 36.1 percent. Those anticipating more jobs in the coming months fell from 17.9 percent to 14.3 percent.
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