Consumer Confidence Falls to Two-Year Low
“Rising prices for fuel and food had a devastating impact on household budgets, and falling home prices have diminished consumers’ sense of financial security,” according to Richard Curtin, director of the Reuters/University of Michigan Surveys of Consumers.
"Although still above the point that signals an impending recession, the diminished level of consumer confidence indicates that consumer spending growth will nearly come to a halt in the closing months of 2007 and in the first few months of 2008.
The engine of consumer spending is expected to sputter at the turn of the year but not stall, and slowly gain speed in the last half of 2008.” He said the primary risks for a recession depend on how low home prices sink and how high fuel prices climb.
The Index of Consumer Sentiment was 76.1 in the November 2007 survey, down from 80.9 in October, and
significantly below the 92.1 recorded in November of 2006. The Index of Consumer Expectations, a closely watched component of the Index of Leading Economic Indicators, was 66.2 in the November 2007 survey, down from 70.1 in October, and well below the 83.2 recorded last November.
Buying plans for homes, vehicles, and large household durables each fell in the November survey. The last
time views on buying conditions for household durables—furniture, appliances, home electronics, and the like—were less favorable was 15 years ago. “The current situation as well as in the early 1990's are similar in that consumers were more apprehensive about their overall financial situation, especially given their debts and savings,” Curtin said.