|Thousands seeking employment turned out Wednesday for a federal government job fair in Atlanta. (Rich Addicks/Journal Constitution via Associated Press)|
Confidence index nears 29-year low
Drop outpaces most negative forecast
WASHINGTON - Confidence among US consumers approached its lowest level this month since 1980, as job losses mounted and the slide in home values deepened.
The Reuters/University of Michigan preliminary index of consumer sentiment fell for the first time in three months, to 56.2. The gauge reached a low of 55.3 in November.
The Dow Jones industrial average fell 82.35 points, or 1.4 percent, to 7,850.41, its lowest close since the Nov. 20 bear market close.
The deterioration in confidence underscores the challenge President Obama faces in turning around an economy that analysts see heading toward its worst year since 1946. Yesterday's report also indicates households will keep boosting savings as a cushion against unemployment or pay cuts.
"There is no imminent upturn in consumer spending on the horizon," said Michael Darda, chief economist at MKM Partners LP in Greenwich, Conn. "It's going to be rough sledding for at least the next two quarters."
Economists forecast the sentiment gauge would drop to 60.2, according to the median of 58 economists in a Bloomberg News survey. Projections ranged from 56.5 to 64.
The November reading for the University of Michigan's index was the weakest since May 1980, when soaring inflation and unemployment, along with the Iran hostage crisis caused a national malaise.
The report's index of consumer expectations for six months from now, which more closely predicts the direction of consumer spending, fell to 49.1, the lowest since 1980, from 57.8 in January.
A measure of current conditions, which reflects Americans' perceptions of their financial situation and whether it's a good time to buy expensive items such as cars, rose to 67.1 from 66.5.
Economists in a monthly survey by Bloomberg News released Thursday said consumer spending may fall at a 2.7 percent pace during the first three months of the year and 0.9 percent from April through June after declining in the last two quarters of 2008. That would be the first time on record that purchases have dropped for more than three consecutive quarters.
The economy will contract 2 percent this year and the unemployment rate will exceed 8 percent, according to the Bloomberg survey median.