Consumer confidence dropped significantly in February on expectations that business conditions and job prospects will continue to worsen over the next six months, The Conference Board reported today.
The Consumer Confidence Index this month fell to 75 from a reading of 87.3 in January, with double-digit declines seen in the present situation and expectations indices that make up the index.
“The Consumer Confidence Index continues losing ground and, with the exception of the Iraqi War in 2003, is now at its lowest level in nearly 15 years (Nov. 1993, 71.9),” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement. “The weakening in consumers’ assessment of current conditions, fueled by a combination of less favorable business conditions and a sharp rise in the number of consumers saying jobs are hard to get, suggests that the pace of growth in early 2008 has slowed even further.
“Consumers’ expectations have also deteriorated significantly and are now at a 17-year low (Jan. 1991, 55.3). With so few consumers expecting conditions to turn around in the months ahead, the outlook for the economy continues to worsen and the risk of a recession continues to increase.”
According to the survey, consumers’ appraisal of present-day conditions weakened significantly in February, with the present situation index falling to 100.6 from 114.3 in January. Those claiming business conditions are “bad” increased to 21.8 percent from 20.1 percent in the last month, while those claiming business conditions are “good” declined to 18.5 percent from 20.6 percent.
Consumers’ assessment of the job market in February was considerably more pessimistic than January, as those saying jobs are “hard to get” rose to 23.8 percent from 20.6 percent, and those claiming jobs are “plentiful” decreased to 20.6 percent from 23.8 percent.
Consumers’ short-term expectations also deteriorated considerably in February, with the expectations index sinking to 57.9 from 69.3 a month ago. The percentage of consumers expecting business conditions to worsen over the next six months increased sharply to 21.4 percent from 16.3 percent last month, and those anticipating business conditions to improve declined to 9.5 percent from January’s 11.5 percent.
The outlook for the labor market was also significantly more pessimistic this month, as those expecting fewer jobs in the months ahead surged to 27.9 percent from 21.9 percent, and those anticipating more jobs declined to 9 percent from 10.5 percent. The proportion of consumers expecting their incomes to increase declined to 17 percent from 18.1 percent.
The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.