- The Washington Times - Tuesday, May 29, 2012

The nation’s top indicator of consumer confidence took an unexpected tumble in May, suffering its biggest one-month drop since October and hitting a four-month low.

Expected to rise this month, the Conference Board’s Consumer Confidence Index surprised economic analysts when it instead ticked down for the third consecutive month, to 64.9, from April’s level of 68.7.

Despite the spring losses, economists had thought the index would rise to around 70, leaving many fearing that the economy is having a uniquely difficult time shaking off the recession.

“The Great Recession was unlike the ones before it,” said Lynn Franco, director of economic indicators at the Conference Board. “So it’s just taking confidence and consumers in general much longer to recuperate.”

The index is watched with particular attention in election years, as a gauge of voter sentiment about the economy as the candidates head into the fall campaign. A falling level of consumer confidence could prove problematic for President Obama’s re-election drive.

Analysts blamed the fall on a number of factors, including a slow-hiring outlook, stock-market reversals and troubles in the global economy.

Chris Christopher, U.S. economist at IHS Global Insight, says the unexpected fall leaves the country “deep in recession territory.”

“Consumer confidence is taking a beating,” he said. “If consumer mood is not doing too well, consumers don’t spend as much. When people don’t feel as much at ease, they are a little more reluctant to spend that extra dollar and splurge.”

The Conference Board is a global independent business research association that measures economic activity.

On the Consumer Confidence Index, a score of 90 indicates consumers believe that the economy is healthy.

The Present Situation Index, a measurement of current consumer confidence, declined to 45.9 from 51.2 in April. Those saying business conditions are “bad” increased to 34.3 percent from 33.2 percent last month. While those claiming “good” business conditions decreased to 13.6 percent from 15.5 percent.

The Expectations Index, another measurement of consumer confidence about the future, declined to 77.6 from 80.4 in April. Those expecting business conditions to improve over the next six months decreased to 16.6 percent from 18.5 percent.

“Consumers were less positive about current business and labor market conditions, and they were more pessimistic about the short-term outlook,” Ms. Franco said.

The difficulty in finding jobs has played a big role in consumers’ lack of confidence, with those saying jobs are “hard to get” increasing to 41 percent from 38.1 percent. Those who believe jobs are “plentiful” decreased, to 7.9 percent from 8.4 percent.

Going forward, consumers don’t have much hope for the labor market to improve. Those expecting fewer jobs in the months ahead increased to 21 percent from 18.4 percent, while those anticipating more jobs in the months ahead decreased to 15.8 percent from 16.9 percent.

“We haven’t really had strong job growth,” Ms. Franco said. “We’ve had back-to-back rather weak labor market reports, and jobs are critical to consumer confidence, so that seems to have a negative impact.”

Ms. Franco and the Conference Board said the next official unemployment report, which the Labor Department releases Friday, will have a big impact on consumer confidence. She expects the economy to add about 150,00 to 175,000 jobs per month for the rest of the year.

“That should help,” she said. “We’ll have a few months of improvements, and then it retreats. It’s been two steps forward, one step back, but we’re gradually moving in the right direction.”

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