Well, that was a bit surprising…
Particularly after this Gallup survey from the other day in which the outlook of Americans was seen improving sharply after the latest national debt/deficit “can kick” earlier in the month, it’s a bit shocking to see the Conference Boards’ Consumer Confidence Index continue its late-2012 swoon here in 2013.
The overall confidence index dropped from an upwardly revised 66.7 in December to 58.6 in January, far below analysts’ expectations for only a modest decline, and the index now sits at its lowest level in 14 months. Moreover, this is now the worst two-month decline since the depths of the financial crisis in early-2009 save for one other time – in the summer of 2011 during the debt ceiling crisis.
The present conditions index fell 7.3 points, from 64.6 in December to 57.3 in January, while the expectations component fell 8.5 points from 68.1 to 59.5, so, the deterioration in outlook was spread almost evenly between the two rather than being more of a short-term phenomenon related to wrangling over the debt in Washington. Once again, it’s worth remembering that readings in the 60s and 70s seen in recent years are more characteristic of recessions than economic recoveries.
The Conference Board’s Lynn Franco cited rising payroll taxes as the proximate cause for this month’s decline, noting “Consumers are more pessimistic about the economic outlook and, in particular, their financial situation. The increase in the payroll tax has undoubtedly dampened consumers’ spirits and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock”.