Consumer Confidence on Shaky Ground

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Consumer Confidence on Shaky Ground


JERSEY CITY, N.J. -- A new Reuters/University of Michigan study indicates consumer confidence is not as steady as one may hope.

According to the study, the consumer sentiment index suffered a major blow in June as it fell to its lowest level since March 2009, dropping 7.7 points to 63.8. As Chris G. Christopher Jr., senior principal economist with IHS Global Insight, explained, "the consumer side of the economy is not looking good. There is hardly one good thing that has developed in the past few months that would indicate that consumers should be optimistic -- with the exception of falling gas prices."

He added that May and June employment figures also shine a light on the lack of jobs still plaguing the country.

"In the first months of the year, the relatively strong employment numbers and robust stock market were holding up consumer spending and confidence despite rising gasoline and food prices, falling home prices, depressed levels of household net worth and tight credit conditions," he said. "Consumer confidence and spending have headed south as job prospects started to wane and volatility in the stock market increased. As gasoline prices started falling, food prices were still increasing and core price inflation (price inflation excluding energy and food) starting rearing its ugly head."

In addition to consumer confidence, the report found that the economic conditions index fell 5.7 points to 76.3 -- a level not seen since September 2009. Also, the economic outlook index decreased 9 points to hit 55.8, also its lowest level since March 2009.

"This is a very bad report. Consumer mood is at depressed levels and most of the economic news has not been favorable to consumer confidence and spending; falling gasoline prices are helpful but are insufficient to drive up consumer spending and confidence," Christopher stated. "The recent bickering over the debt ceiling emanating from the Capitol is not very helpful to confidence as well. It is blatantly clear that the American consumer is worried and tired. This is terrible news since consumer spending represents 70 percent of the economy."