People were spooked last month over a downgrade of U.S. long-term debt, renewed concerns about the health of European banks and wild stock market wings. And not much has changed since then. The stock market is still volatile. And worries about the economy in the U.S. and Europe persist.
As a result, The Conference Board, a private research group, said Tuesday that its Consumer Confidence Index was at 45.4 in September. The number is slightly above the revised reading in August of 45.2, which was the lowest since April 2009. A reading of above 90 indicates the economy is on solid footing.
“The pessimism that shrouded consumers last month has spilled over into September,” said Lynn Franco, director of The Conference Board Consumer Research Center in a statement.
Economists watch the index closely because consumer spending accounts for about 70 percent of U.S. economic activity. The Conference Board bases its index on results of a random survey of consumers at 5,000 households from Sept. 1 through Sept. 15.
One gauge of the index, which measures how shoppers feel now about the economy, declined to 32.5 from 34.3 in August. The other gauge, which measures shoppers’ outlook over the next six months, edged up to 54.0 from 52.4 in August.
Consumers’ feelings about jobs and wages also were a mixed bag. Those claiming jobs are “hard to get” increased to 50.0 percent, from 48.5 percent, while those stating jobs are “plentiful” increased to 5.5 percent from 4.8 percent. Meanwhile, the proportion of consumers anticipating an increase in their incomes, declined to 13.3 percent from 14.3 percent
Franco said consumers’ concern about their expected earnings “does not bode well for spending.”
It’s not hard to see why consumers are freaked out about the U.S. economy. Net job creation came to a halt in August in the U.S. The official unemployment rate stayed at 9.1 percent. And consumers are facing higher prices for everything from food to clothing as retailers try to offset their rising costs for labor and materials.
As consumers go, so do retailers. Merchants have been worried that consumers will stop spending. The back-to-school shopping season went well for stores, but they still have concerns heading into the winter holiday shopping season, which runs roughly from November through December and is typically the busiest shopping period of the year.
So far, most industry surveys are predicting a respectable winter holiday shopping season despite the down economy. All the estimates fall below the 4.1 percent rise in revenue last year, but above the average annual gain of 2.6 percent over the past decade.
Deloitte LLP expects stores’ revenue to grow 2.5 percent to 3 percent for the period from November through January. Research firm ShopperTrak and the International Council of Shopping Centers trade group both expect a gain of 3 percent for November and December. The National Retail Federation, the nation’s largest retail trade group, will give its revenue forecast early next month.
Alison Paul, who heads up Deloitte’s retail practice, said shoppers will remain focused on deals but could spend a little more than last year, barring catastrophic events.
“I think we are going to have an OK Christmas,” she said. “What shoppers say and what they do are two different things. Shoppers continue to sound down, but they still show up at the stores.”
Another report found that consumers earned less and spent less for a second straight year in 2010. The government data shows how Americans are struggling after the worst recession since the Great Depression.
The Labor Department says in its annual survey of consumer behavior that spending fell 2 percent last year, only the second decrease since the government began the survey in 1984.
People spent less last year on food, cut back on entertainment and eating in restaurants and gave less to charity. At the same time, they paid more for gas and health care — trends that have continued this year.
Incomes fell 0.6 percent in 2010 after a 1.1 percent drop in 2009.
Consumer spending and income have increased only modestly this year.