October 28, 2008
Consumers are feeling anything but confident these days, but can you
blame them? A banking crisis, a narrowly averted economic collapse and
rising unemployment helped cause consumer confidence to fall to a
record low in October, according to the Conference Board.
The Consumer Confidence Index now stands at 38.0, down from 61.4 in September. The Present Situation Index decreased to 41.9 from 61.1 last month. The Expectations Index declined to 35.5 from 61.5 in September.
The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS, a research firm. The survey measured sentiment through October 21.
TNS is the world's largest custom research company. The cutoff date for October's preliminary results was October 21st.
"The impact of the financial crisis over the last several weeks has clearly taken a toll on consumers' confidence," said Lynn Franco, Director of The Conference Board Consumer Research Center. "The decline in the Index is the third largest in the history of the series, and the lowest reading on record."
In assessing current conditions, Franco said consumers rated the labor market and business conditions much less favorably, suggesting that the fourth quarter is off to a weaker start than the third quarter. Looking ahead, consumers are extremely pessimistic, and a significantly larger proportion than last month foresees business and labor market conditions worsening.
Their earnings outlook, as well as inflation outlook, is also more pessimistic, and this news does not bode well for retailers who are already bracing for what is shaping up to be a very challenging holiday season, Franco said.
Consumers' appraisal of current conditions deteriorated sharply in October. Those saying business conditions are "bad" increased to 38.3 percent from 33.4 percent, while those claiming business conditions are "good" declined to 9.2 percent from 12.8 percent. Consumers' assessment of the labor market was also much more negative. The percentage of consumers saying jobs are "hard to get" rose to 37.2 percent from 32.2 percent in September, while those claiming jobs are "plentiful" decreased to 8.9 percent from 12.6 percent.
Consumers' short-term outlook turned significantly more pessimistic. Those expecting business conditions to worsen over the next six months surged to 36.6 percent from 21.0 percent, while those anticipating conditions to improve fell to 9.9 percent from 13.4 percent.
The outlook for the job market was also less favorable. The percent of consumers expecting fewer jobs in the months ahead surged to 41.5 percent from 26.9 percent, while those anticipating more jobs decreased to 7.4 percent from 11.9 percent. The proportion of consumers expecting their incomes to increase fell to 10.8 percent from 15.1 percent.
