Consumer confidence fell in January, marking the second consecutive monthly decrease of the index. The Conference Board's Consumer Confidence Index was 79.0, down 1.7 points from the revised 80.7 in December. The Index was in line with economists' expectations and is now at the lowest level since November 1993. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
Confidence was mixed across both portions of the Conference Board index. Present Conditions, a factor in the total composite index, rose to 75.4 from 69.6 in December. This index measures how consumers perceive the current state of the economy.
The Expectations portion of the index, a measure of future economic activity, was responsible for the overall index decrease. The index score of 81.4 was down 6.7 points from December.
Consumer confidence levels have fluctuated greatly in the last year. Between January 2002 and 2003 the Conference Board index has ranged from a peak of 110.7 in March 2002 to the current nine-year low of 79.0 in January 2003.
The University of Michigan's Consumer Sentiment Index, a comparable index, also decreased in January to 82.4 from 86.7 in December. The component indices were mixed. The Expectations Index caused the decrease with an 8.0 point drop to 72.8. The Present Conditions portion rose to 97.2 from 96.0 in December.
While consumers had a more positive view of current conditions in January than in December, expectations for the future took a downturn. Consumers remain concerned about a possible war with Iraq and rising fuel prices. The weak national labor markets with unemployment at 6% weighed heavily on consumer confidence as well. High debt levels and deteriorating consumer credit conditions also contributed to declining confidence.
Despite the concerns, there remains some support for further consumer spending. Although threatened by weak labor market conditions, income and wages continue to grow moderately. Interest rates remain low and disposable income may be boosted by the passage of an economic stimulus package. Since consumer spending accounts for two-thirds of the U.S. economy, consumer confidence will remain a closely watched and critical component for economic recovery.
Sources: www.cnnfn.com
www.conference-board.com
www.economy.com
