Consumer Confidence Declined to 87 in Jan 2008
January 29, 2008 - Consumer confidence fell in January 2008, approaching a two-year low, as Americans struggled with high energy costs and a persistent housing slump.
The Conference Board’s index of confidence decreased less than forecast to 87.9 from a revised 90.6 the prior month, the New York-based group said today. The index averaged 103.2 last year.
The figures may reinforce concern that Americans will cut back spending, which accounts for more than two-thirds of the economy. Home values and stock prices are falling, and higher gasoline and heating-fuel costs are adding to consumers’ woes, economists said.
“Concerns about housing and gasoline prices are weighing on consumer confidence, and the stock market declines don’t help,” said Russell Price, senior economist at H&R Block Financial Advisors in Detroit, who forecast a drop to 87.5. “Still, until it starts to affect individuals, spending will stay positive.”
The confidence gauge was forecast to drop to 87, from an originally reported reading of 88.6 for December, according to the median estimate in a Bloomberg News survey of 66 economists. Projections ranged from 80 to 92. The index two months ago reached the lowest since October 2005.
Earlier today, the S&P/Case-Shiller home-price index fell in November for the 11th month in a row. Prices dropped 7.7 percent from a year earlier after dropping 6.1 percent in October, according to the S&P/Case-Shiller home-price index.
Income Outlook
The Conference Board’s measure of present conditions rose to 115.3 in January from 112.9 the prior month. The gauge of expectations for the next six months decreased to 69.6 from 75.8.
The share of consumers who said jobs are plentiful increased to 23.9 percent, from 23.6 percent last month, today’s report showed. The proportion of people who said jobs are hard to get fell to 20.1 percent from 22.7 percent.
The proportion of people who expect their incomes to rise over the next six months declined to 17.6 percent from 20.2 percent. The share expecting more jobs also slipped to 10.5 percent from 10.9 percent.
A Commerce Department report showed orders for U.S. durable goods rose more than forecast in December, suggesting business investment is holding up even as other parts of the economy weaken. The 5.2 percent increase was the biggest since July and follows a revised 0.5 percent gain in November that was greater than previously reported, the government said.
Housing Slump
Compared with other sentiment gauges, the Conference Board’s index tends to be more influenced by attitudes about the state of the labor market, economists said. A report on Jan. 18 showed the Reuters/University of Michigan consumer sentiment index unexpectedly rose in January, the first gain since July.
The housing recession is now in its third year and the job market is slowing. Employers added 18,000 workers in December, the lowest gain since 2004, and the unemployment rate jumped to 5 percent, according to government figures.
Businesses are seeing a slowdown in demand. Regis Corp., the operator of Supercuts hair salons, said on Jan. 22 that its second-quarter net income was at the low end of the company’s forecast because of a decline in consumer spending during the holiday shopping.
Americans continue to spend on some services. Netflix Inc., the largest U.S. mail- order movie-rental service, said fourth- quarter profit rose more than analysts estimated, and revenue jumped 9.1 percent.
U.S. Consumer Confidence Declined to 87.9 in January
By Shobhana Chandra | Bloomberg