Consumer confidence drops in April
NEW YORK (AP) - April 29, 2008 The New York-based Conference Board said that its Consumer
Confidence Index, which had plummeted in March, fell again to 62.3
in April, down from the revised 65.9 last month and 76.4 in
February. The number was in line with the consensus estimate of 62
from Wall Street economists surveyed by Thomson/IFR, but the index
remains at its weakest point since March 2003, when it registered
61.4, ahead of the U.S. invasion of Iraq.
"This continued weakening suggests that not only has the feeble
level of growth in the first quarter spilled over into the second
quarter, but the economic conditions may have slowed even
further," Lynn Franco, director of the Conference Board Consumer
Research Center, said in a statement. "And not only are lackluster
business and job conditions eroding confidence, but rising gasoline
prices are undoubtedly heightening concerns."
The Present Situation Index, which measures shoppers' current
assessment of economic conditions, dropped to 80.7 in April from
90.6 in March. The Expectations Index, which measures the outlook
over the next six months, was little changed at a depressed 50.1,
compared to 49.4 in March.
Eroding consumer confidence foreshadows weakening consumer
spending, which could further hurt the already deteriorating
economy since consumer spending accounts for more than two-thirds
of the nation's economic activity.
Wall Street pulled back after the index showed the fourth
straight month of declines in the consumer sentiment reading. In
late morning trading, the Dow Jones industrial average fell 53.33,
or 0.41 percent, to 12,818.42. Broader markets also fell.
The downbeat news on confidence came as the widely watched
Standard & Poor's/Case-Shiller index showed that housing prices
dropped in February at the fastest rate ever, showing that the
housing slump is gaining momentum.
The pair of reports were released as the Federal Reserve is
expected to cut interest rates by a quarter point on Wednesday, but
then hold firm for the rest of the year. The Fed is facing a
difficult juggling act of trying to shore up the deteriorating
economy without encouraging inflation, a growing concern among
Americans.
Franco noted that consumers' worries about inflation are still
rising, and that measure now matches the all-time high reached in
the aftermath of Hurricane Katrina in the fall of 2005 when gas and
oil prices soared after the hurricane and other storms devastated
New Orleans and shut down a large chunk of the nation's oil
refineries.
She added that the percentage of respondents surveyed who
intended to take a vacation over the next six months has fallen to
a 30-year-low, another indications that consumers are turning more
frugal.
The dismal reading is another blow to retailers, which have
struggled with a spending malaise that has worsened in recent
months. Shoppers are being confronted with a number of economic
problems as soaring gas and food bills are outpacing meager wage
gains. Consumers are also faced with an escalating credit crisis
and slumping housing values.
A big worry is the employment market, which has been shedding
jobs in recent months. The Labor Department is expected to show
another loss of 65,000 when it releases its April report Friday;
that follows a 80,000 job loss in March. Analysts also estimate
that the unemployment rate will remain at 5.1 percent.
Consumers' current appraisal of the labor market was more
negative in April. The percentage of those who said jobs are "hard
to get" rose to 27.9 percent from 24.5 percent, while those
claiming jobs are "plentiful" declined to 16.6 percent from 19.2
percent.
Their job outlook was mixed. Those expecting fewer jobs in the
months ahead increased to 32.8 percent from 29.3 percent, while
those anticipating more jobs increased to 9.0 percent from 8.0
percent. The proportion of consumers expecting their incomes to
increase declined to 15.1 percent from 16.1 percent.
Meanwhile, money from the government's economic stimulus plan
have begun dropping into bank accounts - but with rising gas and
groceries bills, early indications suggest that shoppers will focus
on catching up on basics like meat or eggs, instead of buying a new
TV or clothes. That means that grocery stores and discounters could
be the few beneficiaries in the retail world of the stimulus plan.
The Consumer Confidence report is derived from responses through
April 22 of a representative sample of 5,000 U.S. households. It
has a margin of error of plus or minus 2.5 percentage points.
ative sample of 5,000 U.S.
households.