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Consumer confidence falls to 26yr low { March 2008 } Original Source Link: (May no longer be active)
http://www.bloomberg.com/apps/news?pid=20601087&sid=aWR0yVu.0d6g&refer=worldwidehttp://www.bloomberg.com/apps/news?pid=20601087&sid=aWR0yVu.0d6g&refer=worldwide
U.S. Economy: Sentiment Weakens More Than Anticipated (Update2)
By Bob Willis
April 25 (Bloomberg) -- U.S. consumer confidence fell more than forecast in April to a 26-year low as record fuel prices and rising unemployment threatened to reduce spending.
The Reuters/University of Michigan sentiment index decreased to 62.6, from 69.5 the previous month. The measure was down from a preliminary estimate of 63.2 issued on April 11.
Consumers are growing increasingly anxious because the economy has lost almost a quarter million jobs so far this year, gasoline is up 17 percent and property values have fallen. Sales of houses and cars have declined as a result, contributing to a slowdown that may bring an end to the six-year expansion.
``Consumers are feeling the pinch, not only from the labor market, but also from prices,'' Aaron Smith, an economist at Moody's Economy.com in West Chester, Pennsylvania, said in a Bloomberg Television interview. ``There's a squeeze on incomes from two sides.''
Economists had forecast the consumer sentiment gauge would fall to 63.2 from 69.5 in March, according to the median of 60 projections in a Bloomberg News survey.
The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, dropped to 53.3 from 60.1 last month.
Stocks fell, pushing the Dow Jones Industrial Average down 56.2 points, or 0.4 percent, to 12,792.8 at 12:28 p.m. in New York.
Current Conditions
A measure of current conditions, which reflects Americans' perceptions of their financial situation and whether it's a good time to make big-ticket purchases like cars, decreased to 77 from 84.2 last month.
Consumers were also more concerned about inflation. Americans thought prices would increase 4.8 percent over the next 12 months, up from a 4.3 percent estimate in March. Longer term, inflation was pegged at 3.2 percent, the highest level since August 2006 and compared with 2.9 percent last month.
The economy lost 80,000 jobs in March, the most in five years, following a 76,000 drop in payrolls in each of the prior two months, according to figures from the Labor Department. The jobless rate rose to 5.1 percent, the highest level in more than two years.
Rising fuel costs have contributed to a drop in auto sales and prompted some shoppers to limit trips to malls. The average price of regular unleaded gasoline rose to a record $3.58 a gallon yesterday, according to data from AAA.
Auto Sales
Cars and light trucks sold at an average 15.2 million annual pace in the first three months of the year, the fewest since the third quarter of 1998. Some 14.9 million autos will be sold this year, the fewest since 1995, Standard & Poor's forecast this month.
AutoNation Inc., the largest publicly traded U.S. car dealer, yesterday said first-quarter profit fell 35 percent as weak housing markets in states including California hurt demand for new vehicles.
``We expect to continue to see a challenging automotive retail market as long as the current economic difficulties persist,'' Chief Executive Officer Michael Jackson said in a statement.
Only one-third of consumers polled by the University of Michigan said they planned to spend the tax-rebate checks that the Treasury Department is poised to send as part of the Bush administration's economic stimulus plan. The majority of Americans plan to use the money to pay down debt or boost savings, the report said.
Bush Comments
President George W. Bush today said Americans will start getting that tax rebates next week and predicted the money will give the economy a boost.
Economists surveyed by Bloomberg earlier this month forecast consumer spending will rise at a 0.5 percent pace in the first half of the year, the smallest gain since 1991. The economy is unlikely to grow at all through June, the survey also showed.
Those polled put the odds of the economy entering a recession this year at 70 percent, up from 50 percent in the prior month's poll.
The biggest housing slump in a generation is leading the downturn. Home prices nationwide have fallen 10 percent from their peak, according to the S&P Case-Shiller home-price index, and many economists are forecasting values will keep dropping. Falling property prices make Americans feel less wealthy and reduce the amount of equity owners can tap for spending.
Rising foreclosures are also lifting stress levels. Foreclosure filings jumped 57 percent and bank repossessions more than doubled in March from a year earlier as rates on adjustable mortgages increased, Irvine, California-based RealtyTrac Inc., a seller of default data, said last week.
Last Updated: April 25, 2008 12:31 EDT
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