Consumer confidence plummeted in February, marking the third consecutive monthly decrease of the index. The Conference Board's Consumer Confidence Index was 64.0, down nearly 15 points from the revised 78.8 in January. The Index was far below economists' expectations and is now at the lowest level since October 1993. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
Confidence fell across both portions of the Conference Board index. Present Conditions, a factor in the total composite index, dropped to 61.6 from 75.3 in January. This index measures how consumers perceive the current state of the economy.
The Expectations portion of the index, a measure of future economic activity, was 65.6, down 15.5 points from January.
The University of Michigan's Consumer Sentiment Index, a comparable index, also decreased in February to 79.9 from 82.4 in January. The component indices were also down. The Expectations Index decreased 2.9 points to 69.9. The Present Conditions portion fell to 95.4 from 97.2 in January.
With confidence levels from both indices at their lowest rates in more than nine years, consumers remain concerned about a possible war with Iraq and rising fuel prices. The average price of a gallon of unleaded gasoline is up nearly 45% from last year. A flat labor market, high debt levels, and deteriorating consumer credit conditions also weigh on confidence.
Despite the concerns, there remains some support for further consumer spending. Although threatened by weak labor market conditions, income and wages continue to grow moderately. Interest rates remain low and disposable income may be boosted by the passage of an effective economic stimulus package. Since consumer spending accounts for two-thirds of the U.S. economy, consumer confidence will remain a closely watched and critical component for economic recovery.
Sources: www.cnnfn.com
www.conference-board.com
www.economy.com
