Consumer Confidence Falls to 16-Year Low

May 27, 2008  by in UnCategorized   

By Home Furnishings Business in on May 2008 The Conference Board’s Consumer Confidence Index fell again in May, for the fifth consecutive month, this time dropping to a 16-year low. The Index now stands at 57.2 (1985=100), down from 62.8 in April. The previous low, set in October of 1992, was 54.6.

Two associated indices, the Present Situation Index and the Expectations Index, also declined, to 74.4 from 81.9, and to 45.7 from 50, respectively.

Also taking a hit were consumers’ plans to buy some big-ticket items, such as cars and homes. The percentage of consumers expecting to purchase an automobile in the next six months declined to 4.8 percent in May from 5.8 percent in April, and 2.1 percent of consumers said they planned to buy a home in the next six months, down from 2.5 percent in April.

Consumers’ appraisal of current conditions grew more pessimistic in May. Those claiming business conditions are “bad” rose to 30.6 percent from 26.5 percent last month, while the number of consumers saying business conditions are “good” declined to 13.1 percent from 15.4 percent in April.

The current labor market continued to be a sore point for consumers, with 28 percent saying jobs were hard to get, versus 27.9 percent last month. The outlook for jobs in six months was virtually unchanged from April expectations, with 8.7 percent saying more jobs would be available compared with 8.8 percent a month ago.

Consumer confidence was identified as the number one measure of how the economy was performing by respondents in Home Furnishings Business’ exclusive economic survey, published in the October 2007 issue of HFB.

Regionally speaking, seven of the nine U.S. areas recorded declines in confidence in May, with the largest decline, 21.7 points, posted in the West North Central region. The two regions showing gains in confidence were New England, up six points to 49.7, and the Mountain region, up 9.3 points to 76.8 points.

“Weakening business and job conditions coupled with growing pessimism about the short-term future have further depleted consumers’ confidence in the overall state of the economy,” said Lynn Franco, director of the Conference Board Consumer Research Center.

“Consumers’ inflation expectations, fueled by increasing prices at the pump, are now at an all-time high and are likely to rise further in the months ahead,” Franco added. “As for the short-term outlook, the Expectations Index suggests little likelihood of a turnaround in the immediate months ahead.”

The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The cutoff date for May’s preliminary results was May 20.