Big dip in consumer confidence measured


ChartConsumer confidence readings have been trending downward, and the closely watched measurement from the Conference Board is proving to be no exception. It found a significant drop in sentiment from December to January.

The Index fell to 58.6 after landing at 66.7 in December. The Expectations Index also dropped, from 68.1 to 59.5; and the Present Situation Index is down from 64.6 to 57.3.

CB’s Lynn Franco stated, “Consumer Confidence posted another sharp decline in January, erasing all of the gains made through 2012. Consumers are more pessimistic about the economic outlook and, in particular, their financial situation. The increase in the payroll tax has undoubtedly dampened consumers’ spirits and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock.”

16.7% believe that current business conditions are good, down from 17.2%; on the flip side, 27.4% believe they are bad, up from 26.3%.

Numbers on employment also went in the wrong direction. 8.6% believe jobs are plentiful, down from 10.8%; and 37.7% believe they are scarce, up from 36.1%.

Those expecting the economy to improve during the next six months fell from 18.1% to 15.4%; but there was also a decrease in the people who think it will decline, which dropped from 21.1% to 20.6%. Only 14.3% believe there will be more jobs on the horizon, down from 17.9%, while the number expecting fewer jobs was flat at 27%.

Nielsen provides the research used by Conference Board in compiling its results.

RBR-TVBR observation: The results we’ve been seeing of late have broken with the normal pattern. Over the past few post-fiscal-crisis years, the new year begins with a burst of optimism, which lasts until sometime in spring when it becomes clear that any economic gains will be sluggish at best.

This time around, the existence of the so-called fiscal cliff exposed the dysfunction of Congress for all to see, and it dragged out all through the month of December and into early January, and was finally topped off with the bitter cherry of the return to the old social security payroll deduction rate.

There are still signs out there that the economy is moving in the right direction even if the acceleration rate isn’t ideal. So there is reason to believe that this is the year we’ll see confidence start out pessimistic and improve as time goes on instead of vice versa.