Skip to content
Business
Link copied to clipboard

Faith in economy lowest in 16 years

Americans' confidence in the economy fell this month to its lowest since the early 1990s under the weight of the long housing slump, a sluggish job market, and rising prices, especially for gasoline.

Shana McCray shops at Steve & Barry's in New York. The consumer confidence index came in at 50.4 for June. The score for the Middle Atlantic was 39.3, down from 45.4 the previous month.
Shana McCray shops at Steve & Barry's in New York. The consumer confidence index came in at 50.4 for June. The score for the Middle Atlantic was 39.3, down from 45.4 the previous month.Read moreMARK LENNIHAN / Associated Press, File

Americans' confidence in the economy fell this month to its lowest since the early 1990s under the weight of the long housing slump, a sluggish job market, and rising prices, especially for gasoline.

The Conference Board said yesterday that its consumer confidence index dropped nationally to 50.4, the lowest since February 1992. The level was 58.1 in May.

"From a consumer perspective, this is the most troubling economy since the 1980s," said Mark Vitner, an economist at Wachovia Corp.

In the Middle Atlantic states - Pennsylvania, New Jersey and New York - the June confidence index fell to 39.3 from 45.4. The June level was the worst since August 1993.

"In the Middle Atlantic region, the financial sector makes up a large portion of the economy - and as we well know, there has been a lot of turmoil in that area for several months," said Lynn Franco, director of the Conference Board's Consumer Research Center.

She said the region's continuing loss of manufacturing jobs also was contributing to the generally bleak atmosphere in the region.

As in the rest of the nation, Franco said, people's income expectations are the lowest they have ever been "because of gas prices and food prices. Their homes, the financial markets, they are losing ground. There's very little to boost consumers' morale right now."

In the three-state region, expectations for the future are down as well as assessments of the current situation. The only areas with lower scores are New England and the East North Central, which includes the automobile-industry dependent states of Michigan, Ohio and Indiana.

The confidence index is widely watched because consumer spending accounts for about two-thirds of the nation's economic activity.

The index is based on a 1985 level of 100. Nationally, it now is half what it was a year ago. The consensus estimate of economists surveyed by Thomson/IFR was for a more modest decline to 56.5 for June.

The consumer confidence report is derived from responses received through June 18 from a survey of 5,000 representative U.S. households.

Inflation - rising prices, especially for energy and food - plus 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 L.L.C.

"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 index of consumers' expectations for the future hit an all-time low, declining in June to 41.0 from 47.3 in May.

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.

The proportion of consumers expecting their incomes to increase declined to 12.3 percent from 14.1 percent.