NEW YORK | U.S. consumers are the gloomiest they’ve been since the tail end of the last prolonged recession. Inflation, sinking home values and soaring gas prices have pushed confidence to the lowest level since 1992. Consumers’ view of the economic future has never been lower, raising worries that already weak consumer spending could deteriorate further.
“From a consumer perspective, this is the most troubling economy since the 1980s,” said Mark Vitner, an economist at Wachovia Corp.
The Conference Board’s consumer confidence index, released Tuesday, fell to 50.4 this month, the lowest reading since February 1992 and half what it was a year ago. The index dropped more steeply than expected from 58.1 in May. The consensus estimate of economists surveyed by Thomson/IFR was for a more modest decline to 56.5 for June.
Separately, home prices continued to tumble. April’s decline in the Standard & Poor’s/Case-Shiller home price index was the steepest since its 2000 inception.
Inflation, political flux and job insecurity have created an “uncertainty more acute, perhaps, than any time since 9/11,” said William Hummer, chief economist at Wayne Hummer Investments.
“I don’t think this can be purged immediately by an election or anything else,” he said. “I think it’s endemic, deep-rooted and likely to persist.”
The last prolonged U.S. recession was from July 1990 to March 1991. The most recent recession began in March 2001 and ended that November.
While the economy currently continues to grow, thanks to strong exports, “there’s a real gulf between an economy being held up by exports and what’s happening in people’s everyday lives,” Wachovia’s Mr. Vitner said.
“Most people live in the domestic economy,” he said.
Although tax rebates buoyed consumer spending in May and incentives from General Motors Corp. may entice consumers to keep spending this summer, analysts are worried about whether they’ll have extra money come fall.
Home owners who bought in the last five years are unlikely to pocket a windfall from selling anytime soon. All 20 cities tracked by the Standard & Poor’s/Case-Shiller home price index, released Tuesday, posted annual declines, as prices rolled back to levels last seen in August 2004. The index fell by 15.3 percent in April versus a year ago. The narrower 10-city index declined 16.3 percent in April, the largest decline in its more than two-decade history.
Economists expect home prices to keep dropping through 2009, with the most pessimistic saying the total decline will be double the drop so far.
That uncertainty is reflected in consumers’ moods. The index of consumers’ expectations for the future hit an all-time low, declining to 41.0 from 47.3 in May. The index has fallen by half over the last year.
Consumers’ appraisal of the current job market also grew more pessimistic. Those saying that jobs are “hard to get” increased to 30.5 percent from 28.3 percent in May. Those claiming jobs are “plentiful” declined to 14.1 percent from 16.1 percent.
Expectations for the job market in the months ahead also deteriorated, with 35.5 percent of consumers expecting fewer jobs available, up from 32.3 percent in May. The proportion of consumers expecting their incomes to increase declined to 12.3 percent from 14.1 percent.
The consumer confidence report is derived from responses received through June 18 from a survey of 5,000 representative U.S. households.