Consumer confidence barely budged from a two-year low as housing troubles, a credit crunch, high energy prices and turbulence on Wall Street continue to make people uneasy about the economy and their own financial situations, according to The Associated Press.
The RBC Cash Index showed confidence clocking in at 65.9 in early December. That hovered close to a reading of 64 in November, which marked the worst showing since the devastation wrought by the Gulf Coast hurricanes in 2005.
‘There’s a great deal of angst out there,’ said economist Ken Mayland, president of ClearView Economics. “There is a great deal of fear and foreboding.”
Economists said a host of factors were to blame for the still gloomy mind-set of consumers. The collapse of the housing market, which has dragged down home values, has made people feel less wealthy. Home foreclosures have shot up to record highs. Harder-to-get credit has made it difficult for some to make big-ticket purchases. High energy prices are squeezing wallets and pocketbooks. And, Wall Street’s gyrations have made some worry about the value of their nest eggs.
Over the past year, consumers’ confidence has deteriorated sharply, reflecting the toll of the problems facing the economy. Last December, confidence stood at a solid 86.9. The index is based on the results of the international polling firm Ipsos.
Overall consumer sentiment remains at very low levels, said T.J. Marta, fixed income strategist at RBC Capital Markets. “Gasoline and oil prices are starting to slip but remain elevated. The stock market continues to struggle to make new highs. The housing situation remains dire.”
Fed Eyes Consumers
One thing the Federal Reserve is watching closely is how consumers – a major force in shaping overall economic activity – behave in terms of their spending and investing. The big worry among economists is that they will cut back sharply, throwing the economy into a recession. The odds of this happening have grown, analysts said. Still, economists, Fed officials and the Bush administration are hopeful such a situation can be avoided.
To stave off a possible recession, the Fed has sliced a key interest rate twice this year. A third rate reduction is expected when policymakers meet next week.
President Bush’s approval rating on the economy rose slightly to 36% in December, from 32% in November, according to a separate AP-Ipsos poll. His overall job-approval rating also inched up to 36%.
Individuals’ sentiments about the economy’s prospects and their own financial fortunes over the next six months came in at a feeble 7.9. In November this measure turned negative, with a reading of minus 4.3.
Another measure looking at current economic conditions dropped to 85.3 in December, compared with 90.3 in November.
Economists keep close tabs on confidence barometers for any clues about consumers’ willingness to spend.
A gauge of peoples’ attitudes about investing, including their comfort in making major purchases, fell to 79.7 in December. That was down from 83.4 in November and was the lowest reading in just over two years.
Another index tracking consumers’ feelings about employment conditions edged up to 113.9 in December, up from 111.8 in November.
The overall confidence index is benchmarked to a reading of 100 in January 2002, when Ipsos started the survey.
The RBC consumer confidence index was based on responses from 1,009 adults surveyed Monday through Wednesday about their attitudes on personal finance and the economy. Results of the survey had a margin of sampling error of plus or minus 3 percentage points.