Consumer confidence tumbles to 16-year low
Conference Board's measure is the fifth lowest ever as consumers fret jobs and the business outlook.
NEW YORK†(CNNMoney.com) -- A key measure of consumer confidence dropped in June to the fifth lowest reading ever, as Americans grew more concerned about their jobs and rising food and fuel prices.
The New York-based research group Conference Board said Tuesday that its Consumer Confidence Index dropped to 50.4 from a revised 58.1 in May. The reading was the lowest since February 1992, when it was 47.3.
Economists had expected the index to decline to 56, according to Briefing.com.
Lynn Franco, director of the Conference Board, said the report is an indication that the economy is "stuck in low gear."
"Perhaps the silver lining to this otherwise dismal report is that Consumer Confidence may be nearing a bottom," Franco said in a statement.
This year's loss of jobs, the simultaneous decline of stocks and home prices, and the sharp rise in food and fuel prices all combined to leave this month's consumer confidence index at roughly half that of 2007's composite average, according to economist Bernard Baumohl of the Economic Outlook Group.
Baumohl said consumer spending has held up well in recent weeks, despite "horrible" consumer confidence, but he expects that to change after the effects of the economic stimulus and the annual tax refunds have subsided.
"Getting both at this time of year had led to an increase in household spending, but I expect this to be temporary. I'm looking for spending to trail off in the latter part of the summer," Baumohl said.
As the labor market contracts and home values dip, Baumohl expects spending - the bedrock of the American economy - to suffer.
"If consumers are not spending, then the economy is in serious trouble. I think we're in a recession right now," he said.
As in 1992, the low number comes in the middle of a presidential election campaign in which the economy has become a key issue.
An adviser for presumed Republican nominee John McCain weighed in on the report, calling the numbers a point of "concern."
"We know that the public has been concerned and regardless of whether the geeks in the world think there's a recession or not, the public feels like that," the McCain campaign wrote in a statement.
An adviser for presumed Democratic nominee Barack Obama read the report as a call for change.
"The disappointing consumer confidence numbers are yet more evidence that we need a change in our economic policy," the Obama campaign wrote in a statement.
Among the components in the overall report, the Expectations Index - a measure of consumers' economic outlook for the future - hit an all-time low, declining to 41 from 47.3 in May.
The Present Situation Index, which measures how the average consumer feels about the economy right now, decreased to 64.5 from 74.2 in May.
The number of respondents reporting that business conditions as bad increased to 32.5% from 29.7% in May, while those claiming business conditions as good declined to 11.5% from 13% last month.
Consumers' take on the job market was also more pessimistic this month. Those who said jobs are hard to get increased to 30.5% from 28.3% in May, while those saying jobs are plentiful declined to 14.1% from 16.1% the month before.
The labor market for the months ahead was also cause for concern. The percent of consumers expecting fewer jobs in the near future increased to 35.5% from 32.3%, while those who think there will be more jobs declined to 8% from 9%.
The six-month outlook for future business conditions got worse in June. Those who expect business conditions to worsen until December rose to 33.9% from 32.9%, while those who expect business to get better decreased to 8.8% from 10.6% in May.
The index - based on a survey of 5,000 U.S. households conducted for The Conference Board by TNS - has declined for six months in a row. The index uses 1985 as the benchmark year when the index stood at 100.