Consumer confidence drops to 5-year low in March on pessimism about jobs, income
AP Business Writers
NEW YORK ” Consumer confidence sank to a five-year low in March as tight credit markets, rising prices and worsening job prospects made many worry that the economy has fallen into recession.
The Conference Board, a business-backed research group, said Tuesday that its Consumer Confidence Index plunged to 64.5 in March from a revised 76.4 in February. That was far below the 73.0 expected by analysts surveyed by Thomson/IFR.
The index has been weakening since July, and is watched because lower consumer confidence tends to result in lower consumer buying, which is a drag on the economy.
Lynn Franco, director of the Conference Board’s research center, said the latest index reading was the lowest since 61.4 in March 2003, just ahead of the U.S. invasion of Iraq.
“Consumers’ outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon,” she added.
There were steep declines in two companion indexes.
The present situation index, which looks at current conditions, slumped to 89.2 in March from 104.0 the month before. The expectations index, which looks ahead, dropped to a 35-year low of 47.9 in March from 58.0 in February. The last time the reading was that depressed was in December 1973, when it registered 45.2 amid the Arab oil embargo and Watergate scandal, the Conference Board said.
In the expectations appraisal, a growing number of consumers said they expected business conditions to worsen over the next six months. On the labor market, consumers expecting fewer jobs increased to 29 percent in March from 28 percent in February, while those expecting more jobs declined to 7.7 percent from 8.9 percent.
The survey by the New York-based Conference Board is based on a sample of 5,000 U.S. households.
A widely watched index of U.S. home prices fell 11.4 percent in January, its steepest drop since data for the indicator was first collected in 1987.
The decline reported Tuesday in the Standard & Poor’s/Case-Shiller index means prices have been growing more slowly or dropping for 19 consecutive months.
The index tracks the prices of single-family homes in 10 major metropolitan areas in the U.S.
The broader 20-city composite index also fell, dropping 10.7 percent in January from a year ago. That makes it the first time both indexes dropped by double-digit percentages.
“Home prices continue to fall, decelerate and reach record lows across the nation,” said David Blitzer, index committee chairman at S&P. “No markets seem to be completely immune from the housing crisis.”
Blitzer said all 20 cities S&P tracks have seen dropping prices for five consecutive months, when compared to the prior month. What’s more, the declines are growing in severity, with 13 of the 20 cities reporting their biggest single monthly decline in January.
The worst performing markets are Las Vegas and Miami, which both reported 19.3 percent drops.
Charlotte, N.C., squeaked by as the only gainer, with a 1.8 percent rise in January.
Economists have predicted a 15 percent to 20 percent yearly decline in housing prices, so the Case-Shiller results are not far off expectations, said Global Insight’s chief U.S. economist, Brian Bethune.