Consumer confidence down, outlook bleak
-- Kids Today, 1/1/2008
Consumers still are on edge when it comes to the economic outlook for the next six months. According to The Conference Board, consumer confidence declined to 87.3 in November, down from 95.2 in October.
The decline is directly influenced by what consumers see on the horizon — or in Conference Board parlance — the Expectations index. Consumers continue to be apprehensive over the “volatility in financial markets, rising prices at the pump and the likelihood of larger home heating bills this winter” said Lynn Franco, director of The Conference Board Consumer Research Center. “In fact, consumers’ inflation expectations have surpassed the spike experienced during the spring of 2007.” According to the Feds, however, inflation remains under control when food and energy prices are stripped out of the equation.
Consumers don’t seem to expect business conditions to improve over the next six months, either. Those expecting business conditions to worsen increased to 16.7% from 13.9%. Those anticipating business conditions to improve declined to 12.4% from 14%.
The outlook for the labor market also remains bleak. The unemployment rate for November held steady at 4.7%, essentially unchanged from October and September. In October, 22 states and the District of Columbia recorded over-the-month unemployment rate increases, 17 states registered decreases, and 11 states had no changes.
With 7.2 million unemployed persons, consumers continue to be pessimistic in their views regarding the prospect of job growth. The Conference Board Survey shows 23.1% now expect fewer jobs in the months ahead, up from 20.2%.
Average hourly earnings were up in November a scant 8 cents per hour to $17.63 for production and non-supervisory workers on private non-farm payrolls from $17.55 per hour. Retail workers actually saw a decline in hourly earnings from $12.86 in October to $12.74 in November. It’s no real surprise then that the Conference Board’s November survey shows 11% of consumers expect their incomes to decrease in the upcoming months, up from 9.1% in the previous month.
Retailers also are showing signs of concern after consumer spending inched up 0.2% in October, the weakest showing since a similar increase in June. Wal-Mart, Macy’s and JCPenney, to name a few, are bracing themselves for a dent in sales during the upcoming year. “Retailers will likely have to resort to heavy discounting to lure consumers into their stores,” said Richard F. Moody, Chief economist at Mission Residential.
Home prices in the third quarter slumped 4.5% from a year earlier, matching a record decline from the previous period as the housing downturn continues to expand. The U.S. housing sector remains quite depressed and builders do not expect a turnaround until late 2008 at the earliest according to the Federal Reserve.
As hundreds of thousands of Americans struggled with monthly payments they can’t keep up with, third-quarter U.S. mortgage delinquencies rose to a 20-year high and foreclosures hit an all-time high, according to the Mortgage Bankers Association.
The latest data from RealtyTrac, an online marketplace for foreclosure properties, noted the increase at 2% for October to a total of 224,451 filings. That’s up 94% from a year ago, according to the site. For the third quarter, RealtyTrac shows a total of 635,159 foreclosure filings, a 30% increase from the previous quarter and an increase of nearly 100% from the third quarter of 2006.
Foreclosure activity remains highest in California, Florida and Nevada. Other states in the top 10 with the highest levels of foreclosure activity include Ohio, Georgia, Michigan, Colorado, Arizona, Indiana and Illinois, according to RealtyTrac.
However, there is a glimmer of light for the 2008 economic outlook. Federal Reserve Chairman Ben Bernanke has signaled the central bank is prepared to cut interest rates further if needed to keep the country out of a full-blown recession. And, economists remain optimistic saying “We may see slowing of the growth, but we’ll still see growth” and “the U.S. economy has many strengths and the expansion is expected to continue.”
| 2007 | 2006 | |
| October | ||
| Alabama | 3.1% | 3.6% |
| Alaska | 6.1 | 6.6 |
| Arizona | 3.5 | 4.1 |
| Arkansas | 5.7 | 5.4 |
| California | 5.6 | 4.8 |
| Los Angeles-Long Beach-Glendale 1 | 5.1 | 4.5 |
| Colorado | 3.7 | 4.2 |
| Connecticut | 4.7 | 4.3 |
| Delaware | 3.4 | 3.5 |
| District of Columbia | 5.8 | 6.1 |
| Florida | 4.2 | 3.2 |
| Miami-Miami Beach-Kendall 1 | 4.0 | 3.6 |
| Georgia | 4.7 | 4.6 |
| Hawaii | 2.7 | 2.1 |
| Idaho | 2.5 | 3.3 |
| Illinois | 5.3 | 4.1 |
| Chicago-Naperville-Joliet 1 | 5.1 | 4.1 |
| Indiana | 4.6 | 4.9 |
| Iowa | 3.9 | 3.5 |
| Kansas | 3.8 | 4.5 |
| Kentucky | 5.6 | 5.7 |
| Louisiana | 3.3 | 4.3 |
| Maine | 4.8 | 4.7 |
| Maryland | 4.0 | 3.9 |
| Massachusetts | 4.3 | 5.1 |
| Michigan | 7.7 | 7.1 |
| Detroit-Warren-Livonia 2 | 8.0 | 7.3 |
| Minnesota | 4.7 | 4.0 |
| Mississippi | 6.1 | 6.7 |
| Missouri | 5.6 | 5.1 |
| Montana | 3.1 | 3.0 |
| Nebraska | 3.2 | 3.0 |
| Nevada | 5.2 | 4.3 |
| New Hampshire | 3.2 | 3.5 |
| New Jersey | 4.1 | 4.4 |
| New Mexico | 3.1 | 3.9 |
| New York | 4.6 | 4.2 |
| New York City | 5.3 | 4.4 |
| North Carolina | 4.8 | 4.9 |
| North Dakota | 3.4 | 3.3 |
| Ohio | 5.9 | 5.5 |
| Cleveland-Elyria-Mentor 2 | 5.9 | 5.4 |
| Oklahoma | 4.4 | 4.0 |
| Oregon | 5.5 | 5.4 |
| Pennsylvania | 4.5 | 4.7 |
| Rhode Island | 4.9 | 5.1 |
| South Carolina | 5.8 | 6.6 |
| South Dakota | 2.9 | 3.3 |
| Tennessee | 4.6 | 5.1 |
| Texas | 4.1 | 4.8 |
| Utah | 2.8 | 2.6 |
| Vermont | 4.3 | 3.7 |
| Virginia | 3.1 | 3.0 |
| Washington | 4.8 | 5.0 |
| Seattle-Bellevue-Everett 1 | 4.0 | 4.2 |
| West Virginia | 5.0 | 5.2 |
| Wisconsin | 5.2 | 4.7 |
| Wyoming | 2.9 | 3.6 |
| Data refer to place of residence. Metro areas are based on Office of Management and Bdget definitions. 1. Metropolitan division 2. Metropolitan statistical area Source: Bureau of Labor Statistics |
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