Confidence among U.S. consumers remains essentially unchanged one month after it dropped to a recession-period low over persistent fears of a deteriorating job market, the increasing costs of food and clothing, and turmoil in the stock market, according to data collected through September 15.
The Conference Board Consumer Confidence Index inched up to just 45.4 (out of 100), a mere tweak of the August number of 45.2, which was the lowest level since April 2009. “The pessimism that shrouded consumers last month has spilled over into September,” Lynn Franco, director of the conference board, said in a statement. Confidence readings above 90 indicate a healthy economy, a level not reached since 2007.
One component of the index, which measures how Americans feel about the economy, dropped to 32.5, the lowest since January, down from 34.3 in August. It’s the fifth consecutive decline, “a sign that the economic environment remains weak,” said Franco.
“It's no surprise that households are just as downbeat as they were during the recession,” said Paul Dales, economist with Capital Economics. “Who can blame them? Confidence is at a level that is consistent with stagnation in real consumption growth.”
Consumers encountered a lean job market in September: Fifty percent of Americans found jobs hard to come by, the highest level since May 1983.Those who said they anticipated more jobs in the months ahead edged up to 12 percent from 11.8 percent, while those expecting fewer jobs declined to 28.6 percent from 31.2 percent.
Yet consumers expressed a greater concern about their expected earnings, “a sign that does not bode well for spending,” Franco said. The number of those planning to buy major appliances, including refrigerators, washing machines or TV sets, , declined to 39.2 percent, down from 49.4 in August.
“Consumers are likely to hunker down and really cut back on discretionary purchases,” said Mark Vitner, senior economist with Wells Fargo. “It casts some doubt about the upcoming shopping season.”
Growing fears of a double-dip recession will likely continue to impact consumer sentiment in the coming months. The heightened risk of a double dip has sparked the Federal Reserve to sell $400 billion in short-term Treasurys and replace them with longer-term Treasurys in an attempt to cut long-term interest rates and boost the weak economy.
Still, Scott Hoyt, economist with Moody’s Analytics, says there is “limited optimism.” Hoyt points to gas prices that are trending lower, debt burdens continuing to fall and declines in the stock market that seem to have ended. “As the economy continues to grow, confidence should recover, unless the low confidence results in lower spending and drives further economic weakness,” Hoyt said.
Home Prices Rose in July
In a separate report out today, home prices rose 0.9 percent in July due to seasonal demand, posting the fourth consecutive monthly increase, according to the Standard & Poor’s Case/Shiller home price index. Year over year, however, prices are down 4.1 percent.
Detroit and Washington, D.C., were the only two cities to see annual price gains, up 1.2 percent and 0.3 percent, respectively. Minneapolis saw a 9.1 percent decline over the same from one year earlier. Of the 20 cities the report tracks, 17 reported prices higher than the previous month.
The housing market remains depressed due to high foreclosure activity, high unemployment and tight credit; the weak demand has been a significant drag on home prices. Some experts say home prices will continue to fall this year by as much as two percent. A report last week from MacroMarkets LLC expected home prices to rise a mere 1.1 percent annually through 2015. “While we have now seen four consecutive months of generally increasing prices, we do know that we are still far from a sustained recovery,” said David M. Blitzer, chairman of S&P’s index committee.
