US Consumer Confidence at a 5-Year Low

In March a combination of continued job losses and increased oil prices have resulted in further denting consumer confidence that has fallen to a five year low, as the Conference Board’s confidence index fell to 73.5 from 75 in February.

Plummeting property values have spread fear through the country and increased concern over spending in an economy that depends on consumer spending to the tune of around 65 percent.

Russel Price, a senior economist at Block Financial Advisors said that the average American consumer is under very heavy pressure because “People have seen their buying power erode and there is likely to be further downside to come.”

The S&P/Case-Shiller 20-city home-price index that will be released later on today is forecast to be down 10.5 percent in January from the same month a year earlier.

Policy makers at the Federal Reserve have lowered the benchmark interest rates and attempted to alleviate the pressures by pumping money into the banking system.

It is believed that by making it easier and cheaper for Americans to borrow then spending will automatically increased, although the psychological damage of the credit crunch has yet to be quantified.

According to the Fed “growth in consumer spending has slowed and labor markets have softened” causing the outlook for economic activity to remain bleak although a recovery in the labour market, lower interest rates, a cooling in commodity prices and stability in the property market will ultimately re-ignite consumer spending.

Story link: US Consumer Confidence at a 5-Year Low