Consumer confidence falls on recession, employment fears
WASHINGTON - People's confidence in the economy sank even lower amid heightened fears about shrinking job opportunities and the possibility the country is falling into recession.
According to the RBC Cash index, confidence dropped to a mark of 48.5 in early February, from 56.3 last month. The new reading was the worst since the index began in 2002 and surpassed the previous low reached in January.
The continued erosion in confidence comes despite the fact that Federal Reserve chairman Ben Bernanke has gotten much more forceful in cutting interest rates to induce people to buy more and bolster the economy. The Fed slashed interest rates twice over the span of just eight days in January - its most aggressive rate reductions in two decades.
The White House and Congress, meanwhile, want to energize the economy by giving rebates to people and tax breaks to businesses. Congress passed an emergency plan Thursday that sends rebates to most taxpayers in an effort to spark the economy. President Bush has indicated he would sign the measure.
Still, an increasing number of economists worry the rescue efforts by the Fed and the politicians may not be enough to avert the first nationwide recession since 2001. Some economists believe the economy has already toppled into a recession.
One of the biggest causes of angst: a weakening job market, analysts said. US employers cut jobs in January for the first time in more than four years, the government reported last week. Wage growth also slowed last month, the report showed.
Another source of anxiety: a housing slump that continues to drag on. The housing bust has led to record-high home foreclosures and has dragged down home values - usually peoples' single biggest asset - making them feel less wealthy. In addition, high energy and food prices are squeezing budgets and turbulence on Wall Street is shrinking nest eggs. All these things are making people feel more insecure about their own financial fortunes and more concerned about the direction of the economy as a whole.
Over the past year, consumer confidence has deteriorated a lot, underscoring the toll of the housing collapse and a credit crunch that has made it harder for people to secure financing for big-ticket purchases such as homes, cars, and appliances. Last February, confidence stood at a buoyant 103. The index is based on results of the international polling firm Ipsos.
"We are on the cusp of, or in the early stages of a recession. The confidence numbers clearly reflect consumers' feelings about that," said Greg McBride, senior financial analyst at Bankrate.com.
Economic problems have helped pull President Bush's approval ratings to record lows. Only 29 percent of the public approves of his handling of the economy, the lowest mark yet, according to a separate Associated Press-Ipsos poll. The president's overall job-approval rating slid to 30 percent, also a record low, the poll said.