• David Gill

Shoppers' confidence reaches four-year low

NEW YORK -This was no soft landing. This was a fall from a cliff.

The monthly consumer confidence index, as compiled by The Conference Board, finished January at 114.4, its lowest reading since December 1996.

In reporting the grim results from its January survey of 5,000 consumer households, the board said the indices for nearly every region of the country also dived in January. The worst freefalls of the month came in the East North Central sector, whose confidence index sagged 17.7 percent; and New England, whose index dropped 14.6 percent.

From the plethora of numbers The Conference Board compiled in its survey, it was clear that the future is what's depressing consumers the most. The expectations index, one of the two major components to the overall indicator, dropped more than 20 percent from December to January. It finished last month at 77.0, its lowest reading in nearly eight years.

This last figure was bad enough to dampen the mood of the normally upbeat Lynn Franco, director of The Conference Board's consumer research center. "Consumers' increasing pessimism about the short-term outlook has sent the expectations index into territory normally seen prior to a recession," he said.

Looking at other results from the survey, significantly fewer consumers expect anything good, economically, to happen in the next six months. The ratio of those predicting better business conditions fell from 16.9 percent in December to 12.4 percent in January; what's more, 11.6 percent of the January respondents expect more jobs to be available down the road, as opposed to 14 percent in December.

Franco said, "Since apprehension leads to caution and cautious consumers spend less than confident ones, confidence levels in February will be carefully watched."

Already, news of coming layoffs among companies in a number of industries has been announced.

Mark Vitner, vp and economist for First Union Economics Group, said the layoff news should further weaken confidence. Regarding the layoffs, he added, "Consumers sense real trouble in the economy. They just do not know whether it threatens them yet.

"We have never had a decline of this magnitude in consumer confidence over the past 30 years when the economy was not already in recession," Vitner said.

Consumer confidence by region


REGION % CHANGE

New England

-14.6

Middle Atlantic

-8.3

East North Central

-17.7

West North Central

-11.5

South Atlantic

-5.1

East South Central

0.0

West South Central

+3.8

Mountain

-10.2

Pacific

-8.1


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