Just when it appeared as though the economic news was getting better, and many were lifting their expectations for the months to come, the U.S. Conference Board issued its monthly survey on consumer confidence, and to suggest that it was a forgettable release would be an understatement.
To be sure, there were expectations that this survey would have shown some slippage from the December tally, which had initially been estimated at 65.1, but was revised upward to 66.7. However, the actual January number was well below the forecast result of 64.0, coming in at a clearly less-ebullient 58.6.
The survey, which had gotten up as high as 73.1 in October, broke below the 60 mark for the first time in more than a year, and suggests that there is still plenty of pessimism in place across the country, more than four years into the current, albeit understated, business expansion.
Here are some highlights of the latest report: Those describing business conditions as good came in at 16.1. That was modestly below the 17.2 reading in December. Also, those indicating that their present state of affairs was satisfactory, came in at 57.3. This is a notoriously weaker component than the aggregate number of 58.6, although the differential this time was rather small. A month ago, the present situations index was at a more formidable 64.8. At the same time, the expectations index, which tracks expectations some six months down the road, and which tends to be more positive, came in at a lackluster 59.5 in January, well down from the December reading of 68.1. In November, expectations were at 80.9. So, clearly there has been a good deal of overall deterioration in the past several months.
As to the employment situation, which appears to be improving in most areas, as weekly jobless claims have fallen a five-year low, there was a somewhat less upbeat assessment expressed by the respondents in this survey. Here, for example, those saying jobs were plentiful dipped from 10.8 to 8.6, while those saying jobs were hard to get rose from 36.1 to 37.7.
According to Lynn Franco, the Director of Economic Indicators at the Conference Board, “Consumer Confidence posted another sharp decline in January, erasing all of the gains made through 2012.” One of the problems expressed by those taking the survey was pessimism over the effect of the recently implemented increase in the so-called payroll tax, which deducts wages to pay into the Social Security Trust Fund. This month, the rate on such taxes went from 4.2% to 6.2%. It had been at the lower level for the past two years.
All in all, this was a most disquieting report, and while it is not causing us to yet revisit our economic assumptions for 2013, when we see growth on the order of at least 2%, it would raise some potential red flags if this report should be accompanied by further dour business metrics in the weeks to come. At the time of this article’s writing, the author did not have positions in any of the companies mentioned.