|
Consumer confidence fell more than expected { May 2008 } Original Source Link: (May no longer be active)
http://www.bloomberg.com/apps/news?pid=20601087&sid=aersfm0XlvLg&refer=homehttp://www.bloomberg.com/apps/news?pid=20601087&sid=aersfm0XlvLg&refer=home
U.S. Consumer Confidence Fell More Than Forecast (Update1)
By Timothy R. Homan
June 24 (Bloomberg) -- Consumer confidence fell more than forecast this month to the lowest level in more than 16 years, raising the risk that Americans will retrench after spending their tax rebates.
The Conference Board's confidence index fell to 50.4, the lowest level since February 1992, from a revised 58.1 in May. Consumers were the most pessimistic about the future in the 41- year history of the index. A separate report today showed home prices in April dropped the most since at least 2001.
Falling property values, rising unemployment and higher food and fuel bills have shaken consumers and may cause purchases to slump once the rebate money is gone. While price increases signal the Federal Reserve may raise borrowing costs later this year, policy makers are forecast to hold the target rate unchanged tomorrow as concern over growth lingers.
``The confidence reading is grim,'' said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. ``Sure we'll get a bump up from the tax rebates, but once that is over, we're facing what is increasingly looking like an air pocket for consumers.''
Economists forecast the confidence report from the Conference Board, a private New York-based research group, would fall to 56, according to the median of 69 economists in a Bloomberg News survey. Estimates ranged from ranged from 50 to 60.
Other Measures
Earlier this month, the Reuters/University of Michigan preliminary index of consumer sentiment for June fell to the lowest level in 28 years. The report also showed Americans forecast inflation for the next five years will be 3.4 percent, matching May's reading as the highest since 1995.
Today's report from S&P/Case-Shiller shows house prices in 20 U.S. metropolitan areas fell 15.3 percent in April from a year earlier, the most since the private group began keeping year-over-year records in 2001.
The Conference Board's measure of present conditions dropped to 64.5 in June from 74.2 in May. A gauge of expectations for the next six months declined to 41, the lowest since records began in 1967, from 47.3 the prior month, the report showed.
Concern over jobs contributed to the decline in confidence. The share of consumers who said jobs are plentiful fell to 14.1 percent from 16.1 percent last month. Those saying jobs are hard to get increased to 30.5 percent from 28.3 percent.
Less Income
The proportion of people who expect their incomes to rise over the next six months decreased to 12.3 percent, the lowest since records began in 1967, according to the Conference Board survey. The share expecting more jobs dropped to 8 percent from 9 percent.
Buying plans over the next six months for automobiles, houses, appliances and vacations all declined.
Consumer spending, which accounts for more than two-thirds of the economy, has been hampered by the jump in food and fuel costs, causing Americans to cut back on purchases of more expensive items like automobiles.
Ford Motor Co., the second-biggest U.S. automaker, last week said sales of large pickup trucks in the U.S. will decline significantly because of $4-a-gallon gasoline.
Alan Mullaly, chief executive officer of the Dearborn- Michigan-based company, said in a statement that demand for pickups and sport-utility vehicles is ``at one of the lowest levels in decades.''
Fed's Dilemma
The housing slump and concerns over rising food and energy costs mean the Fed has to contend with a slowing economy and increases in commodity prices. Investors project the Fed will raise the benchmark rate at their September meeting, according to futures prices.
Economists are less convinced prices will spiral out of control.
``I don't think we're going to have the inflation problem that the markets fear,'' Mark Vitner, senior economist at Wachovia Corp. in Charlotte, North Carolina, said before the report. ``The number one concern for the Fed right now is the financial crisis and the impact from the financial crisis on the overall economy.''
The economy will probably expand at a 0.5 percent annual pace from April through June, according to the median estimate of economists surveyed by Bloomberg News earlier this month. It would be the slowest rate of growth since 2002.
Last Updated: June 24, 2008 10:23 EDT
|
|
