Consumer Confidence Slides in October
All of the October loss was in consumers’ assessments of future economic prospects. The Index of Consumer Expectations, a closely watched component of the Index of Leading Economic Indicators, was 70.1 in the October survey, down from 74.1 in September, and significantly below the 84.8 record last October.
The Current Economic Conditions Index was 97.6 in the October survey, nearly identical to the 97.9 in September, and well below the 107.3 recorded last October.
“Consumers have expressed growing concerns about the housing slump and these concerns have spilled over to less favorable prospects for the overall economy,” according to Richard Curtin, the director of the Reuters/University of Michigan Surveys of Consumers.
The overall level of confidence is still well above the point that signals an impending recession.
“Each downward step in confidence increases the probability of recession, which is still below 50%, but not comfortably so,” Curtin said. Falling home prices as well as higher food and fuel prices will make consumers much more cautious spenders. Overall, the pace of growth in real personal consumption is expected to slow to 2.0% over the next four quarters, with the weakest quarterly growth rate of about 1.0% at the turn of the year.
Declines in the value of their homes were reported by 28% of all homeowners in October, well ahead of the
“The data indicate accelerating declines as 22% of homeowners anticipated declines in the value of their homes during the year ahead in October, up from 14% three months ago,” said Curtin. Homeowners expect a reprieve over the longer term, as two-thirds expect renewed increases, with an annual average expected gain of 3.7% over the next five years.