Economic News

Consumer confidence falls, expectations plummet

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Consumer confidence is down in December, and it appears the fiscal cliff is causing dramatic levels of uncertainty across the nation.

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Consumer confidence continues to slide

According to the Conference Board Consumer Confidence Index®, consumer confidence fell 6.4 percent in December, following a decrease in November. The Expectations Index plummeted from 80.9 to 66.5, with most looking to the fiscal cliff as the most common reason for consumer uncertainty .

Lynn Franco, Director of Economic Indicators at The Conference Board explained, “Consumers’ expectations retreated sharply in December resulting in a decline in the overall Index. The sudden turnaround in expectations was most likely caused by uncertainty surrounding the oncoming fiscal cliff.”

Further, Franco said, “A similar decline in expectations was experienced in August of 2011 during the debt ceiling discussions. While consumers are quite negative about the short-term outlook, they are more upbeat than last month about current business and labor market conditions.”

Consumers pessimistic about the future

Consumers’ optimism about the short-term outlook plummeted in December, with those expecting business conditions to improve over the next six months declined to 3.7 percent to 17.6 percent, while those expecting business conditions to worsen increased a dramatic 5.7 percent to 21.5 percent.

Consumers’ outlook for the labor market also turned more pessimistic. Those anticipating more jobs in the months ahead declined to 17.0 percent from 19.5 percent, while those expecting fewer jobs increased to 27.3 percent from 21.2 percent. The proportion of consumers expecting an increase in their incomes was virtually unchanged at 15.4 percent. However, those expecting their incomes to decline rose to 18.7 percent from 15.6 percent.

The silver lining:

Consumers’ assessment of current conditions improved in December. Although still low, those stating business conditions are “good” rose to 17.1 percent from 14.6 percent. Meanwhile, those stating business conditions are “bad” decreased to 27.3 percent from 31.2 percent.

Consumers’ appraisal of the labor market was mixed. Those saying jobs are “plentiful” edged down to 10.3 percent from 11.0 percent, while those saying jobs are “hard to get” declined to 35.6 percent from 37.4 percent.

While the political grandstanding continues on the Hill regarding the fiscal cliff, consumers are not only feeling uncertain, but regarding the future are pessimistic.

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