Consumer confidence hit an all-time low last month, dropping further in the face of rising layoffs, in yet another sign that consumer spending is unlikely to pull the US out of a yearlong recession anytime soon.
Consumers have been nervous about spending for months — putting off big-ticket purchases, forgoing new clothes and choosing store brands at the grocery store — all of which may make this the worst holiday season for retailers in decades.
The Consumer Confidence Index measured by the Conference Board, a private research group, fell to 38 last month from a revised 44.7 in November. That is its lowest point since the group began compiling the index in 1967, and below the previous low of 38.8 in October. Economists surveyed by Thomson Reuters had expected the index to rise incrementally to 45.
“Deepening job insecurity and falling asset prices are outweighing any optimism consumers may have derived from falling gas prices,” said Dana Saporta, US economist at investment bank Dresdner Kleinwort.
The unemployment rate hit a 15-year high in November and economists expect additional job losses in the first half of this year.
Those saying in the Conference Board survey that jobs are “hard to get” rose to 42 percent last month from 37.1 percent in November, when the unemployment rate stood at 6.7 percent.
Those saying business conditions are “bad” increased to 46 percent from 40.6 percent in November.
Consumer spending is likely to keep dropping well into next year, Saporta said, meaning the recession would last at least into the first half of this year.
The conditions that began the recession persist, especially deflating home prices. A measure of October home prices dropped by the sharpest annual rate on record. The Standard & Poor’s/Case-Shiller 20-city housing index fell by 18 percent from October 2007, the largest drop since its inception in 2000. The 10-city index tumbled 19.1 percent, its biggest decline in its 21-year history.
“The numbers are getting worse. And I think they will get quite a bit worse over the next two months because housing demand has plunged since the market went into turmoil,” said Patrick Newport, an economist at IHS Global Insight.
Consumers have been whipsawed by home prices, the deteriorating job market and shrinking nest eggs.
Preliminary data from SpendingPulse, which tracks purchases paid for by credit cards, checks or cash, showed retail sales fell between 5.5 percent and 8 percent during the holiday season compared with last year.
Excluding auto and gas sales, they fell 2 percent to 4 percent.
Major retailers are expected to report sharply lower sales than last year when they release those figures Jan. 8. Analysts expect a rash of store closings and bankruptcies from both retailers and their suppliers.
The Conference Board’s Present Situation index, which measures how respondents feel about current business conditions and employment prospects, fell to 29.4 last month from 42.3 in November. It is now close to levels last seen after the 1990 to 1991 recession.