Consumer Confidence Plunges to Record Low
Also, the prices of U.S. single-family homes plunged 18.5 percent in December from a year earlier as the monthly pace accelerated, according to a Standard & Poor’s/Case-Shiller home price index released Tuesday.
The Conference Board’s Consumer Confidence Index stands at 25.0, down from the previous all-time low in January of 37.4. The index was well below the 35.5 expected by economists surveyed by Thomson Reuters and the lowest since the survey began in 1967.
On Capitol Hill, Bernanke warned in his semiannual report on monetary policy that the recession may not end this year if the government efforts do not restore financial stability.
“To break the adverse feedback loop, it is essential that we continue to complement fiscal stimulus with strong government action to stabilize financial institutions and financial markets,” Bernanke said in his testimony before the Senate Banking Committee.
Bernanke told the committee that the economy is likely to keep shrinking in the first six months of 2009 and that the Fed would continue to use “all available tools” to stimulate the economy. He did add that he hoped the recession that began in December 2007 would end this year.
The Federal Reserve slashed interest rates to an all-time low of nearly zero percent and Bernanke said rates would remain low.
A year ago, the consumer confidence index stood at 76.4, but since then consumers have suffered through massive job cuts, the collapse of the housing market and shrinking retirement accounts.
Lynn Franco, director of the Conference Board Consumer Research Center, said that concerns over employment, business conditions and earnings led to a decline in confidence.
“All in all, not only do consumers feel overall economic conditions have grown more dire, but just as disconcerting, they anticipate no improvement in conditions over the next six months,” Franco said in a statement.
Consumer confidence is a closely-watched indicator because consumer spending accounts for more than two-thirds of economic activity.
Another indicator released by the Conference Board called the Present Situation Index measures consumers’ assessment of economic conditions. It fell to 21.2 from 29.7 in January. The survey also found that attitudes toward the labor market became more pessimistic. In those asked, 47.8 percent said jobs are “hard to get,” up from 41.1 percent in January.
A third index by the Conference Board, the Expectations Index which gauges outlook over the next six months, fell to 27.5 from 42.5.
Housing numbers released Tuesday also showed little sign of hope. The Federal Housing Finance Agency found that prices on single family homes dropped a record 4.5 percent last quarter from last year but that the rate of depreciation slowed.
The S&P/Case Shiller composite index of 20 metropolitan areas fell 2.5 percent in December from November, compared with a 2.3 percent decline in the previous period, S&P said in a statement.
“There are very few, if any, pockets of turnaround that one can see in the data,” David Blitzer, chairman of S&P’s index committee, said in the statement, according to Reuters. “Most of the nation appears to remain on a downward path.”