Consumer Confidence Lowest Since 2003

by Amy Lillard

 

A slumping housing market and skyrocketing gas prices have pushed consumer confidence to a five-year low.

The Conference Board, a business-backed research group, reported Tuesday a Consumer Confidence Index score of 64.5 for March, a drop from the score of 76.4 in February. The March score is far below the 73.0 expected by analysts, and is the worst since March 2003, prior to the U.S. invasion of Iraq. The score then was 61.4.

The Consumer Confidence Index has shown a pattern of decline since July of 2007. The Conference Board and industry analysts predict sagging consumer confidence will continue, deriving from a depressed job market, uncertain business conditions, and the credit crunch.

Weakened consumer confidence is an important factor in determining the overall strength of the economy, and the outlook for the future. Lower confidence usually translates to reduced consumer spending. Less money pumping in from consumers will further damage the sputtering economy.

The Conference Board also reported steep declines in companion indexes. The present situation index dropped to 89.2 in March, a slump from 104.0 in February. The expectations index dropped to 47.9, the lowest score in 35 years. Contributing to this index score is a growing number of consumers who are pessimistic about business conditions, expecting them to worsen in the next six months. Consumers also expect fewer jobs to be created during this time.

These reports also came with new data on the freefall in home prices. Standard & Poor's/Case-Shiller home price index reported the biggest drop in U.S. home prices in over 20 years. Prices fell 11.4 percent in January, the largest decline since 1987, when the index was first collected.

Taken with the prices from the last 19 months, the recent drop shows a pattern of over a year and a half of declining or slowly growing home prices.

Figures like these are encouraging some analysts to announce the existence of a recession. Many policymakers, government members and economists have been reluctant to suggest a recession is here, but others contend it's already arrived.

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