US consumer confidence sinks to record low
Thursday, 30 October 2008
WASHINGTON, Oct 29 (AFP): US consumer confidence plunged to a record low in October as consumers felt the bite of the credit crisis, a private firm said yesterday, sounding alarms over the year-end holiday shopping season.
The Conference Board, a business research firm, said its consumer confidence index plummeted to 38.0, its lowest reading since the index was launched in 1967, down from 61.4 in September.
Most analysts had expected a more modest decline to 52.0.
John Ryding at RDQ Economics called the October consumer confidence survey "a shockingly weak reading."
The index had stood at 95.2 in October 2007, in the early months of the global financial turmoil stemming from defaults in US subprime, or high-risk, home mortgages.
"This news does not bode well for retailers who are already bracing for what is shaping up to be a very challenging holiday season," she said.
The plunge in consumer confidence followed three consecutive months of modest gains, with the September index revised upward to 61.4 from a prior estimate of 59.8.
The survey of 5,000 households ended on October 21, and came on top of fierce global market turmoil as a tightening credit squeeze brought lending to a virtual halt, prompting massive cash injections and financial rescues by governments.
It also occurred as consumers digested a series of extraordinary government steps to shore up the financial system, including a 700-billion-dollar bailout that was the biggest since the 1930s Great Depression.
"The collapse in confidence is directly tied to perceptions about economic conditions and that is likely to mean that households will keep their wallets closed," said Joel Naroff at Naroff Economic Advisors.
Naroff said the report supports an argument for negative economic growth in the third and fourth quarters, "and maybe the first quarter of next year."
A bellwether of consumer spending, which accounts for two- thirds of US economic growth, confidence has waned as falling home values, rising unemployment, tightening credit and rising inflation fears have consumers tightening their belts. "In assessing current conditions, consumers rated the labor market and business conditions much less favorably, suggesting that the fourth quarter is off to a weaker start than the third quarter," Franco said.
The report coincided with the opening of a two-day Federal Reserve meeting expected to produce a half per centage point cut Wednesday in the key federal funds rate, to 1.0 per cent, in a bid to stimulate the economy and ease credit.
On Thursday the government is set to report its first estimate on third- quarter economic growth that is widely expected to show a sharp slowdown from 2.8 per cent in the second quarter.
According to the Conference Board's October confidence survey, consumers' evaluation of the present situation decreased to 41.9 from 61.1 in September.
Those claiming current business conditions were "bad" increased to 38.3 per cent from 33.4 per cent, while those claiming they were "good" fell to 9.2 per cent from 12.8 per cent.
Consumers saying jobs were "hard to get" rose to 37.2 per cent from 32.2 per cent in September, while those claiming jobs were "plentiful" declined to 8.9 per cent from 12.8 per cent.
The forward-looking expectations index, measuring the outlook over the next six months, tumbled to 35.5 from 61.5.
Those expecting business conditions to worsen surged to 36.6 per cent from 21.0, while those anticipating improvement fell to 9.9 per cent from 13.4 per cent.
Respondents anticipating fewer jobs shot up to 41.5 per cent from 26.9 per cent, compared with a decline to 7.4 per cent in those foreseeing more jobs from 11.9 per cent.
Ryding said the drop in the reading on labor market conditions "signals a significant deterioration in the job market in October."
He said the government's monthly labor report next week likely will show a further rise in the unemployment rate. The September jobless rate was at a five-year high of 6.1 per cent.
The Conference Board, a business research firm, said its consumer confidence index plummeted to 38.0, its lowest reading since the index was launched in 1967, down from 61.4 in September.
Most analysts had expected a more modest decline to 52.0.
John Ryding at RDQ Economics called the October consumer confidence survey "a shockingly weak reading."
The index had stood at 95.2 in October 2007, in the early months of the global financial turmoil stemming from defaults in US subprime, or high-risk, home mortgages.
"This news does not bode well for retailers who are already bracing for what is shaping up to be a very challenging holiday season," she said.
The plunge in consumer confidence followed three consecutive months of modest gains, with the September index revised upward to 61.4 from a prior estimate of 59.8.
The survey of 5,000 households ended on October 21, and came on top of fierce global market turmoil as a tightening credit squeeze brought lending to a virtual halt, prompting massive cash injections and financial rescues by governments.
It also occurred as consumers digested a series of extraordinary government steps to shore up the financial system, including a 700-billion-dollar bailout that was the biggest since the 1930s Great Depression.
"The collapse in confidence is directly tied to perceptions about economic conditions and that is likely to mean that households will keep their wallets closed," said Joel Naroff at Naroff Economic Advisors.
Naroff said the report supports an argument for negative economic growth in the third and fourth quarters, "and maybe the first quarter of next year."
A bellwether of consumer spending, which accounts for two- thirds of US economic growth, confidence has waned as falling home values, rising unemployment, tightening credit and rising inflation fears have consumers tightening their belts. "In assessing current conditions, consumers rated the labor market and business conditions much less favorably, suggesting that the fourth quarter is off to a weaker start than the third quarter," Franco said.
The report coincided with the opening of a two-day Federal Reserve meeting expected to produce a half per centage point cut Wednesday in the key federal funds rate, to 1.0 per cent, in a bid to stimulate the economy and ease credit.
On Thursday the government is set to report its first estimate on third- quarter economic growth that is widely expected to show a sharp slowdown from 2.8 per cent in the second quarter.
According to the Conference Board's October confidence survey, consumers' evaluation of the present situation decreased to 41.9 from 61.1 in September.
Those claiming current business conditions were "bad" increased to 38.3 per cent from 33.4 per cent, while those claiming they were "good" fell to 9.2 per cent from 12.8 per cent.
Consumers saying jobs were "hard to get" rose to 37.2 per cent from 32.2 per cent in September, while those claiming jobs were "plentiful" declined to 8.9 per cent from 12.8 per cent.
The forward-looking expectations index, measuring the outlook over the next six months, tumbled to 35.5 from 61.5.
Those expecting business conditions to worsen surged to 36.6 per cent from 21.0, while those anticipating improvement fell to 9.9 per cent from 13.4 per cent.
Respondents anticipating fewer jobs shot up to 41.5 per cent from 26.9 per cent, compared with a decline to 7.4 per cent in those foreseeing more jobs from 11.9 per cent.
Ryding said the drop in the reading on labor market conditions "signals a significant deterioration in the job market in October."
He said the government's monthly labor report next week likely will show a further rise in the unemployment rate. The September jobless rate was at a five-year high of 6.1 per cent.