Despite expectations that consumer confidence is improving, confidence fell to a new low in December.
The Conference Board, a New York research firm, said consumer confidence for December was 38.0, compared with a revised reading of 44.7 in November. Economists surveyed by Dow Jones had expected consumer confidence to come in at 45.8 in December. The index is close to levels seen in the months following the 1990-1991 recession.
“The further erosion of the Consumer Confidence Index reflects the rapid and steep deterioration of economic conditions that occurred in the fourth quarter of 2008,” said Lynn Franco, director of the Conference Board Consumer Research Center, in a press release. “Declines in the Expectations Index appear to be moderating, but this index continues to hover at historical lows.”
Consumer expectations for the economy in the next six months also decreased in December to 43.8 from 46.2 in November.
“The overall economic outlook remains quite dismal for the first half of 2009, and only a modest recovery is expected in the second half, " said Franco.
In December, those claiming business conditions are "bad" increased to 46% from 40.6%, while those claiming business conditions are "good" declined to 7.7% from 10.1% in November. Consumers' assessment of the labor market was alsomore negative than in November. Those saying jobs are "hard to get" rose to 42% from 37.1% in November, while those claiming jobs are "plentiful" decreased to 6.2% percent from 8.7%.
Mounting layoffs in an already uncertain job market have continued to be at the forefront of consumers worries in recent months. In November, employers eliminated 533,000 jobs -- the most in 34 years -- according to data issued by the Labor Department earlier this month.
“What was particularly weak was the labor market sub component,” said Douglas Smith, chief economist for the Americas at Standard Chartered Bank. “Jobs are what’s weighing on everybody’s minds.”
Smith said people are worried about their jobs and their retirement portfolios, which is weakening confidence even with gas prices seeing a precipitous drop. “Gas prices usually boost confidence. This time around it simply shows how bad things must be.”
Smith said it hard to say if confidence will strengthen in the New Year, saying it depends on what happens on the job front.
The monthly Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. Despite the results of the survey the Dow Jones Industrial Average was recently trading up 25.01 to 8508.94.
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