Job Pessimism Causes Continued Confidence Contraction

July 29, 2009

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The Conference Board Consumer Confidence Index dropped for the second straight month in July 2009, decreasing from 49.3 in June to 46.6 in July because of rising joblessness and continued pessimism about current economic conditions, reports Retailer Daily.

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The Consumer Confidence Index is based on the Conference Board’s Consumer Confidence Survey, and consists of the Present Situation Index, which decreased from adjusted score of 25 in June to 23.4 July, and the Expectations Index, which decreased from 65.5 in June to 62 in July.

Present Situation Index

The percentage of consumers rating current business conditions as “bad” increased from an adjusted 45.3% in June to 46.3% in July although the percentage rating current business conditions as “good” also increased, from an adjusted 8.1% to 9.1%. The percentage of consumers who think jobs are hard to get increased from 44.8% to 48.1, while those who think jobs are “plentiful” decreased from 4.5% to 3.6%.The percentage of consumers anticipating an improvement in business conditions during the next six months decreased to from an adjusted 20.9% to 18%. In addition, those expecting conditions to worsen also decreased from an adjusted 20.4% to 18.9%.


Expectations Index

Consumers also took a mixed view of the short-term future of the labor market. The percentage of consumers expecting more jobs in the months ahead decreased to an adjusted 17.5% to 15%, while those expecting fewer jobs decreased as well, from an adjusted 27.6% to 26.3%. proportion of consumers expecting an increase in their incomes declined from an adjusted 10.1% to 9.5%

Lynn Franco, director of the Conference Board Consumer Research Center, said the most recent consumer confidence figures demonstrate continuing weakness in the US economy.

“Consumer confidence, which had rebounded strongly in late spring, has faded in the last two months,” she said. “The decline in the Present Situation Index was caused primarily by a worsening job market. The decline in the Expectations Index was more the result of an increase in the proportion of consumers expecting no change in business and labor market conditions. However, more consumers are pessimistic about their income expectations, which does not bode well for spending in the months ahead.”

There have been several recent positive pieces of consumer financial news, although not all reports have been optimistic. On the positive side, US retail sales rose 0.6% in June 2009. The US trade deficit shrank 9.7% in May 2009. Consumer credit decreased at a seasonally adjusted annual rate of 1.5% in May 2009, while borrowing figures for April 2009 show that US consumers decreased borrowing by 16%.

Additionally, during May 2009, US consumers saved $768.8 billion, a 26.3% increase from the $608.5 billion saved in April. Personal saving as a percentage of disposable income was 6.9% in May, compared with 5.6% in April. Similar jumps in total personal saving figures and percentages occurred between March and April 2009. Consumers’ personal consumption expenditures, which essentially reflect consumer spending, increased 0.3% in May.

Meanwhile, the US unemployment rate rose from 9.4% in May to 9.5% in June. In another negative economic sign, the RPI (Restaurant Performance Index) slid from 98.6 in April 2009 to 98.3 in May 2009, registering its first decline since December 2008.

About the index: The Consumer Confidence Survey is based on a representative sample of 5,000 US households. The monthly survey is conducted for The Conference Board by TNS. The cutoff date for June’s preliminary results was July 21, 2009.

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