Consumer actions mirror recession behavior
Consumer confidence fell to recession levels in October as more consumers worried about jobs and business conditions, according to The Conference Board. The consumer confidence index rose slightly in September to 46.4 on a 100-point scale, but declined again in October to 39.8. The expectations index fell to 48.7 from 55.1 in September, while the present situation index declined to 26.3 from 33.3. "Consumer expectations, which had improved in September, gave back all of the gain and then some, as concerns about business conditions, the labor market and income prospects increased," said Lynn Franco, director of the consumer research center at The Conference Board. "Consumers' assessment of present-day conditions did not fare any better. The present situation index posted its sixth consecutive monthly decline, as pessimism about the current economic environment continues to grow." The number of consumers who describe business conditions as bad grew to 43.7% in October from 40.5% a month earlier. Meanwhile, those claiming business conditions are good fell to 11% from 12.1%. Consumers maintain pessimistic views of the labor market overall. The number of consumers who view the jobs situation as plentiful fell to 3.4% from 5.6%. Meanwhile, those who say jobs are hard to get decreased to 47.1% from 49.4%. "Aside from a few months during the height of the recession between November 2008 and March 2009, the index has never been lower in its 40-year history," said Paul Ashworth, chief U.S. economist at Toronto-based Capital Economics. "The decline in the expectations sub-index to 48.7 this month, from 55.1, leaves it at a level consistent with a fairly sharp contraction in consumption in the fourth quarter." Ashworth noted that a few positive indicators surfaced during the period. "Other measures of confidence either showed a more modest deterioration in October or even improved slightly," he said. "The rally in stock markets (equity prices rose by nearly 10% during the two week survey period alone) and the decline in gasoline prices would also normally be enough to boost confidence," according to Ashworth. "Most of the other incoming economic data has shown some improvement recently too. In particular, the retail sales figures suggest that consumption growth actually accelerated in September and the weekly initial claims data suggest that labour market conditions haven't deteriorated markedly." Write to Kerri Panchuk.