Extreme Pessimism Plagues October Consumer Confidence

Following a September decrease driven by pessimism about current economic conditions, the Conference Board Consumer Confidence Index fell yet again, from 53.4 to 47.7, in October 2009.

Despite increases in August and only slight decreases in September, both components of the Index - Present Situation Index and the Expectations Index - fell this month by several percentage points, reports Retailer Daily.

Brief highlights from each index follow.

Present Situation Index

The Present Situation Index decreased from 23 in September to 20.7 in October, hitting its lowest reading since February 1983. The percentage of consumers rating current business conditions as “bad” increased from 46.3% to 47.1%, while the percentage rating current business conditions as “good” decreased from 8.6% to 7.7%. Last month, the percentage of consumers rating current business conditions as “good” was up slightly.

Meanwhile, the percentage of consumers saying jobs are currently “hard to get” increased from 47% to 49.6%, while those claiming jobs are “plentiful” decreased from 3.6% to 3.4%.

Expectations Index

Last month, the Expectations Index, which tracks consumer confidence in the direction of the economy and labor market in the next six months, decreased by less than one percentage point. This month, it dropped eight percentage points, from 73.7 to 65.7.

The percentage of consumers anticipating an improvement in business conditions during the next six months decreased from 21.3% to 20.8%, while the percentage expecting conditions to worsen jumped from 14.6% to 18.3%. Last month, the percentage expecting conditions to worsen slightly decreased.

The labor market outlook, which remained virtually flat in September, dropped in October. The percentage of consumers expecting more jobs in the next six months declined from 18% to 16.3%, while the percentage expecting fewer jobs increased from 22.9% to 26.6%. The proportion of consumers expecting an increase in their incomes, which increased slightly last month, dipped this month from 11.2% to 10.3%.

Lynn Franco, director of the Conference Board Consumer Research Center, said labor conditions play a major role in increasing consumer pessimism and reiterated last month’s warning to retailers about the upcoming holiday shopping season.

“Consumers remain quite pessimistic about their future earnings, a sentiment that will likely constrain spending during the holidays,” said Franco.

Recent news on the availability of jobs in the US has been decidedly negative. September unemployment data from the US Bureau of Labor Statistics showed that a significant portion of working-age US adults remain unemployed or only employed part-time. The official unemployment rate crept up from 9.7% to 9.8%, and declines in the civilian labor force participation rate, which now stands at 65.2%, and employment-population ratio, which now stands at 58.8%, demonstrate that the actual percentage of unemployed adults is much higher.

Broken down by state, BLS statistics show jobless rates have increased in all 50 states and the District of Columbia since September 2008. On a monthly basis, unemployment rates have grown in 23 states and the District of Columbia, decreased in 19 states, and remained flat in eight others. Ten states and the District of Columbia reported jobless rates of at least 10% in September, with Michigan continuing to have the highest unemployment rate among the states at 15.3%.

In contrast, the Conference Board’s own Employment Trends Index (ETI) recorded its first rise since January 2008, with a 0.3% improvement in September 2009, signifying more jobs. The Conference Board predicts the trend of declining job losses will continue, but there will be no quick end to the recession.

About the study: The monthly Consumer Confidence Survey is based on a representative sample of 5,000 US households and is conducted for The Conference Board by TNS. The cutoff date for October’s preliminary results was October 21, 2009.

Comments

[doubleguns:]

I guess no one is listening, The administration said the "Recession is over."

Seems most must have read the fine print. "Depression to start."

Oct 28 09:48 AM

[Tack:]

Personal income and personal spending up five straight months. Watch what they do, not what they say.

These "sentiment" surveys have a long history of being brilliant contrarian indicators.

Oct 28 10:18 AM

[GreenMom:]

Yep, recession is over... this is just a small correction... that side money is going to come roaring in, just you wait and see!

Does anyone else feel like we're at that part of the roller coaster ride where we've clinked and clunked up the long climb, the car nearly stops, you lift your arms in confidence... and then it plunges at 80 mph and makes you scream?

Oct 28 10:22 AM

[Stone Fox C...:]

So the media has convinced consumers that the economy is bad. Crazy that we use this report.

Oct 28 11:00 AM

[ebworthen:]

If you ask a 17 year old about his date last night, the story will be completely different from what his date reports.

Look around your local communities and talk to people.

Are things physically recovering? Stores filling up? Commercial property with "For Lease" signs everywhere or new businesses opening? Lot's of homes up for sale and cars and motorcycles and boats out front with "For Sale" signs on them? Yes? Hmmmm....

What is the word on the street? That things are better for real or the powers that be say they are better? Not in my neck of the woods...yours?

Oct 28 11:08 AM

[Dialectical...:]

That's a funny image. Obama standing at the podium saying, "This economy has totally gotten to third base."

On Oct 28 11:08 AM ebworthen wrote:

> If you ask a 17 year old about his date last night, the story will
> be completely different from what his date reports.
>
> Look around your local communities and talk to people.
>
> Are things physically recovering? Stores filling up? Commercial property
> with "For Lease" signs everywhere or new businesses opening? Lot's
> of homes up for sale and cars and motorcycles and boats out front
> with "For Sale" signs on them? Yes? Hmmmm....
>
> What is the word on the street? That things are better for real or
> the powers that be say they are better? Not in my neck of the woods...yours?

Oct 28 11:17 AM

[Options Tra...:]

I usually prefer to just look at the numbers without listening to what "they" say. Bear in mind also all economic numbers are volatile and over reaction to them is really unnecessary. Look at the trend, not each single number in isolation.

Yes, the real economy still feels shitty but thats because these things take time to transform into jobs which then transforms into more buying. As we all can see, unemployment rate is still at recent highs and has not started turning. In this respect, how we feel physically is still pretty much in sync with the numbers.

Oct 28 11:20 AM

[Windsun33:]

In my area I am seeing more and more "for lease" and "for sale" signs, and almost zero "grand opening" signs. In one small shopping plaza nearby, there are only 3 of 14 occupancies - just a year ago it was over half full. The only expansion I have seen in the past year was a gun store that expanded into the adjacent empty store...

Oct 28 11:20 AM

[bottoms-up:]

Although I received my economics degree from UCLA several decades ago -- I'm an "ol' timer," I think there are some lessons here that is to ask a lot of questions of the data and then, as many of you have stated, look at the facts on the ground. I don't see any "Mission Accomplished" indicators anywhere in the world, let alone the United States.

Everyone should be asking those "W" question, as well as that big "H" question: Who, How, Where, Why, When, etc., etc. When you hear these ridiculous reports, consider the source... For example, you hear something like, "A Bloomberg poll of economists..." Well, and these economist work for who? What is their agenda? Do they have a vested interest in pumping and dumping the markets?

Some of this, in my opinion, is self-evident. I happen to believe that the governments, media and business entities are attempting to frame our problems as a matter of "confidence." It is my firm belief that nothing could be further from the truth. This is a structural problem that may take a decade or more to sort out...

Oct 28 11:57 AM

[Dialectical...:]

I thought you meant 'W' questions like, "Aren't we really going to see a 'W' shaped recovery?"


On Oct 28 11:57 AM bottoms-up wrote:

>
> Everyone should be asking those "W" question, as well as that big
> "H" question: Who, How, Where, Why, When, etc., etc. When you hear
> these ridiculous reports, consider the source... For example, you
> hear something like, "A Bloomberg poll of economists..." Well, and
> these economist work for who? What is their agenda? Do they have
> a vested interest in pumping and dumping the markets?
>
> Some of this, in my opinion, is self-evident. I happen to believe
> that the governments, media and business entities are attempting
> to frame our problems as a matter of "confidence." It is my firm
> belief that nothing could be further from the truth. This is a structural
> problem that may take a decade or more to sort out...

Oct 28 06:35 PM

[rick12345:]

How exactly would you define "Extreme" and when did the consumer become an expert on economics???

"Broken down by state, BLS statistics show jobless rates have increased in all 50 states and the District of Columbia since September 2008."

I'm going to pin this one up on my wall as "stupid things to say during a recession."

Oct 29 06:15 AM

[Tack:]

For those of you who guide your investment decisions on consumer-sentiment reports, how are all you "sellers" feeling today?


On Oct 28 10:18 AM Tack wrote:

> Personal income and personal spending up five straight months. Watch
> what they do, not what they say.
>
> These "sentiment" surveys have a long history of being brilliant
> contrarian indicators.

Oct 29 04:44 PM