Wednesday, February 25, 2009
The Conference Board released the results of its February Consumer Confidence survey. From the Washington Post Ticker: Consumer confidence in February hit another all-time low, as Americans struggled with layoffs and a recession.
It's bad out there, folks. To be sure, the February reading did set a record low since 1967, but the record is just one month old, as the January reading was the previous low. In fact, except for the November 2008 bump, each month has set a new record low since September 2008. The labor market is just brutal, and that is killing confidence. Consumers are getting gloomier and gloomier on an uncertain economic future.
Speaking of future, according to the Conference Board survey, consumers don't see light at the end of the economic tunnel for the next six months.
This chart, which illustrates consumer business expectations over the next six months, is particularly disconcerting for two reasons. First, the percentage of consumers surveyed that believe conditions will worsen surged by 9.4% to 40.5%. This is troublesome, since waning confidence in future conditions likely drives down current spending by increasing savings. Yes, this is a good thing over the long run, but it can further contract the macroeconomy hard in the near term.
Second, the number of consumers that claim conditions will not change in 6-months is falling quickly; or an increasing number of individuals are developing an opinion that the economy over next six months will corrode.
The percentage that believe that conditions will not change over the next six months is not listed, 50.8%, but it is simply 100% minus those that believe the economy will worsen, 40.5% in Feb., and those that believe the economy will improve, 8.7%. Notice how there is always a rather stable number of people that believe conditions will be the same over the next six months? Well that has changed abruptly. All the previously "same" people are falling into the "worsen" boat.Overall, this is a terrible report. I imagine that confidence will increase when the fiscal stimulus money starts to roll out; but until then, there is really no reason to be positive right now.