Consumer Confidence Slumps Sharply

Don Hogsett, March 6, 2006

Screeching to a sudden and unexpected halt after three months of steady gains, consumer confidence dropped off sharply during February, slipping by 4.8%, with Americans saying they're feeling uncomfortable about the outlook for the next six months.

The Conference Board's monthly gauge of consumer sentiment slipped to a reading of 101.7, down from 106.8 in January.

Weighing in on the current state of the economy, consumers are still feeling good, and the Present Situation Index held steady at a four-year high. But consumers “are growing increasingly concerned about the short-term health of the economy and, in turn, about job prospects,” said Lynn Franco, director of the business think tank's Consumer Research Center.

Reflecting that anxiety, the Expectations Index tumbled by 9.6%, to a reading of 83.3 from 92.1 in January. Excluding the readings immediately following Hurricane Katrina, the index was at its lowest level in three years, since March of 2003. “If expectations continue to lose ground, the outlook for the remainder of 2006 could deteriorate,” said Franco.

Looking six months out, the number of consumers who think business conditions will worsen increased to 11.1% from 10.5%. Correspondingly, the number who think conditions will improve declined to 16.0% from 17.9% in January.

The outlook for the jobs market also dimmed, and the number of consumers who think fewer jobs will become available jumped up to 20.0% from 15.2% in January.

Buying plans in February
Plans to purchase over the next six months

Source: The Conference Board
Homes 3.3%
Carpets -24.6
Major appliances -3.3
Cars 6.0
Vacation -1.1

Confidence by region

Region % change
Source: The Conference Board
New England -5.9%
Middle Atlantic 1.8
East North Central -14.5
West North Central 4.7
South Atlantic 1.7
East South Central -2.9
West South Central 7.5
Mountain -23.4
Pacific -10.3

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