Consumer Confidence Drop Among Economic Woes
In February, U.S. consumer confidence fell to a five-year low and expectations slumped to a 17-year trough in a tightening jobs market, a new survey found, fueling fears the economy was already in recession.
The Conference Board said Tuesday its index of consumer sentiment fell to 75.0 in February from a downwardly revised 87.3 in January, originally reported as 87.9.
The present situation index fell to 100.6 from a downwardly revised 114.3 in January, while the expectations index fell to 57.9 — its lowest in 17 years — from a downwardly revised 69.3.
It was the biggest monthly drop in the consumer confidence and expectations indexes since Hurricane Katrina hit the Gulf coast in 2005. The present situation index saw its biggest tumble since October 2001, the last time the United States was in a recession.
Sentiment was hurt by a worsening view of the jobs market. The measure of “jobs hard to get” rose to 23.8 in February — its highest since October 2005 — from 20.6 in January.
The measure of “jobs plentiful” fell to 20.6 — its lowest since April 2005 — from 23.8.
President Bush, meanwhile, offered some encouraging words for the economy Tuesday.
“We’re not in a recession, I don’t think we will go in a recession. We’re in a slowdown, and there’s a difference,” Mr. Bush told American Urban Radio Networks.
In other economic news, U.S. home prices posted a second consecutive quarterly drop in the fourth quarter, with every state except Maine recording lower prices, the Office of Federal Housing Enterprise Oversight said Tuesday.
Compared with the third quarter of 2007, home prices fell by 1.3 percent, the housing finance company regulator said in a statement on its Web site.
Home prices have fallen 0.3 percent since the fourth quarter of 2006 as declines in the most recent quarter erased earlier gains. That represents the first four-quarter decline in home values since OFHEO began its survey in 1991.
“While the market weakness is most significant in areas that saw the greatest price run-ups during the (housing market) boom, other states have clearly not been immune to recent declines,” OFHEO director James Lockhart said in a statement, according to Reuters.
The OFHEO data involves homes whose mortgages are valued at $417,000 or below, as it measures variations in the values of loans that can be financed by Fannie Mae and Freddie Mac. Under today’s guidelines, those are loans valued at $417,000 or below.
The number of homes facing foreclosure jumped 57 percent in January compared to a year ago, a mortgage research firm said Monday.
Nationwide, some 233,001 homes received at least one notice from lenders last month related to overdue payments, compared with 148,425 a year earlier, according to Irvine, Calif.-based RealtyTrac Inc. Nearly half of the total involved first-time default notices, according to the Associated Press.
The Labor Department also announced Tuesday that wholesale prices rose 1 percent last month, more than double the 0.4 percent increase that economists had been expecting.
The January surge left wholesale prices rising by 7.5 percent over the past 12 months, the fastest pace in more than 26 years, since prices had risen at a 7.5 percent pace in the 12 months ending in October 1981.
The worse-than-expected performance was certain to capture attention at the Federal Reserve, which has chosen to combat a threatened recession by aggressively cutting interest rates in the belief that weaker economic growth will keep a lid on prices.
But the combination of rising inflation and weaker growth raises the threat of “stagflation,” the economic malady that plagued the country through the 1970s, when a series of oil shocks left households battered by the twin problems of stagnant growth and rising inflation.
The 1 percent jump in wholesale prices followed a 0.3 percent decline in December and was the biggest one-month increase since a 2.6 percent increase in November. That gain had been driven by sharply higher energy costs.
The big jump in wholesale prices followed a report last week that consumer prices had risen by a worse-than-expected 0.4 percent, reflecting higher costs for food, energy and health care.
The wholesale report said that energy prices jumped 1.5 percent, as gasoline prices rose by 2.9 percent and the cost of home heating oil jumped by 8.5 percent.
Food prices, which have been surging because of increased demand stemming from ethanol production, rose by 1.7 percent last month, the biggest monthly increase in three years. Prices for beef, bakery products and eggs were all up sharply.
Core wholesale inflation, which excludes food and energy, posted a 0.4 percent increase, the biggest increase in 11 months. This gain was led by a 1.5 percent spike in the cost of prescription and non-prescription drugs.