VOL. 123 | NO. 73 | Monday, April 14, 2008
Consumer Confidence Sinks to Lowest Since 2002
By JEANNINE AVERSA | AP Economics Writer
WASHINGTON (AP) - Americans' confidence in the economy fell to a new low, dragged down by worries about mounting job losses, record-high home foreclosures and zooming energy prices.
According to the RBC Cash Index, confidence dropped to a mark of 29.5 in April, down from 33.1 in March. The new reading was the worst since the index began in 2002. It marked the fourth month in a row where confidence has fallen to an all-time low.
"Consumers are very pessimistic," said Mark Vitner, economist at Wachovia. "There are not a lot of happy campers out there."
Over the past year, consumer confidence has deteriorated significantly. Worsening problems in housing, harder-to-get credit, financial turmoil on Wall Street and lofty energy prices have put people in a much gloomier mind-set. Last April, confidence stood at 85.4. The index is based on results from international polling firm Ipsos.
All the economy's problems are taking a toll on President Bush's approval ratings, too. The public's approval rating on his economic stewardship fell to a low of 27 percent, according to a separate Associated Press-Ipsos poll. Bush's overall job-approval rating dipped to 28 percent, also an all-time low, the poll said.
Many economists believe the country has tipped into its first recession since 2001. Federal Reserve Chairman Ben Bernanke for the first time acknowledged last week that a recession was possible. It was a rare public utterance of the "r'' word by a Fed chief.
"Consumer sentiment is tracking at levels we think are consistent with a mild recession at this point," said Brian Bethune, economist at Global Insight.
A measure looking at consumer's feelings about current economic conditions slipped to 54.6 in April, from 54.7 in March. The new reading was the lowest in six years of records.
Rising unemployment and job losses are making people more uneasy.
The government reported last week that employers slashed 80,000 jobs in March, the most in five years and the third straight month where the nation's payrolls were cut. The unemployment rate jumped from 4.8 percent to 5.1 percent, the highest since the aftermath of the devastating Gulf Coast hurricanes.
Another factor blamed for eroding consumer confidence is high gasoline prices, which are socking people's wallets and pocketbooks. That's squeezing already strained budgets and leaving people with less money to spend on other things.
"Much of the angst we're seeing from consumers is 'Gosh, I'm working harder and harder, and all I'm doing is paying for my basic necessities. I don't have anything left to have any fun,'" Vitner said.
Gasoline prices, which have set a string of records in recent weeks, climbed to a new record of $3.357 a gallon on Thursday, according to AAA and the Oil Price Information Service.
Anxiety also has grown as people wonder if there is any relief in sight for the troubled housing market. With the housing collapse, many people have watched their single-biggest asset - their home - drop in value. That has made them feel less wealthy and less inclined to spend.
Against the backdrop of all these concerns, another measure tracking individuals' sentiments about the economy and their own financial standing over the next six months fell deeper into negative territory. This gauge dropped to a negative 48.3 in April, down from a negative 41.6 in March. The new reading was the worst on record.
A measure on consumers' feelings about employment conditions fell to 97 in April, from 99.2 in March. The new reading was the lowest since early October 2003. Another gauge of attitudes about investing, including comfort in making major purchases, declined to 56.4 in April, from 56.7 in March. The new figure was the lowest on records going back to 2002.
Economists keep close tabs on confidence barometers for clues about consumer spending, a major shaper of overall economic activity.
Cautious shoppers gave most retailers their most dismal March in 13 years, according to sales figures reported by major retailers on Thursday. J.C. Penney Co., Gap Inc. and Limited Brands Inc. were among the merchants hit by a sharp drop in sales.
The RBC consumer confidence index was based on the responses from 1,005 adults surveyed last week about their attitudes on personal finance and the economy. Results of the survey had a margin of sampling error of plus or minus 3 percentage points. The overall confidence index is benchmarked to a reading of 100 in January 2002, when Ipsos started the survey.
Pointing to the overall confidence reading of 29.5 in April, T.J. Marta, a fixed-income strategist at RBC Capital Markets, said: "What confidence? There is no confidence. It's like 1929."
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