In this May 27, 2011 photo, a customer fuels up his car in view of gas prices, in Philadelphia. A monthly survey shows consumers are losing faith that the economy will keep improving. (AP Photo/Matt Rourke)
Consumer Confidence Index drops unexpectedly to 6-month low in May; gas, job worries persist
Mae Anderson, AP Retail Writer
Tuesday May 31, 2011, 11:29 am
NEW YORK (AP) — Americans are losing faith that the economy will keep improving, according to a monthly survey.
The Conference Board’s Consumer Confidence Index fell to 60.8 from a revised 66 in April, a sign of the toll that high gas prices, a choppy job outlook and a moribund housing market are taking on people’s psyches. Economists had expected an increase to 67. It was the lowest reading since November.
“Consumers are considerably more apprehensive about future business and labor market conditions as well as their income prospects,” said Lynn Franco, director of The Conference Board Consumer Research Center. She said fears over inflation, which eased in April, picked up again in May.
The index, released Tuesday, is still far from the reading of 90 that indicates a healthy economy. It hasn’t approached that level since the recession began in December 2007.
Increased worry about income and jobs coupled with high prices are taking a toll on consumers, said Moody’s Chief Economist John Lonski.
“Expectations of higher prices coupled with expectations of lower income makes for a more anxious consumer,” he said. “The takeaway here is employment and income are not growing rapidly enough to sustain an extended stay by rapid inflation.”
Economists monitor confidence because consumer spending, including big-ticket items such as housing and health care, accounts for about 70 percent of U.S. economic activity and is critical for a strong rebound. A more troubled economic outlook raises the risk that people will pull back on spending.
And consumers have a lot on their minds.
Food makers have raised prices to offset sharply higher commodity costs, and that’s putting pressure on household budgets, particularly for middle- to lower-income people. Retail gasoline prices peaked at a national average of about $3.98 on May 5, according to auto club AAA, Wright Express and Oil Price Information Service, but gas prices still remain stubbornly high. The consumer confidence survey ran from May 1-18.
The real estate market also remains depressed. Home prices fell nationwide for the eighth straight month, according to the Standard & Poor’s/Case-Shiller 20-city index released Tuesday. Home prices in major areas have reached their lowest level since the U.S. housing bubble burst in 2006, stymied by foreclosures, a surplus of unsold homes and continued reluctance of Americans to buy homes.
And the job market remains sluggish. A Labor Department report last week said more people applied for unemployment benefits last week, the first increase in three weeks.
To read entire story, click here.