Consumer Confidence Falls To Five-Year Low
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Confidence among Americans fell to a five-year low this month after home prices dropped by the most since at least 2001, signaling a deepening threat to consumer spending.
The Conference Board’s confidence index fell to 62.3 in April, posting its biggest three-month slide since the last recession in 2001, the New York-based research group said yesterday. House prices in 20 American metropolitan areas dropped 12.7% in February from a year earlier, more than forecast and the most since S&P/Case-Shiller’s records began seven years ago.
Treasuries rallied and stocks fell after the figures indicated no end in sight to the housing slump. Economists anticipate a report tomorrow will show gross domestic product growth slowed to 0.5% in the first quarter as home construction fell, employers cut payrolls, and consumers struggled with a surge in gasoline prices.
“People sense that hard times are upon them,” the senior market economist at Dresdner Kleinwort in New York, who had forecast the confidence gauge would drop to 63, Kevin Logan, said. “They feel the pinch from high gasoline prices, their main asset, their home, is declining in value, and jobs are becoming harder to get.”
The Conference Board’s index dropped from a revised 65.9 reading in March that was higher than previously estimated. Economists had forecast the Conference Board’s measure would fall to 61, according to the median of 67 forecasts in a Bloomberg News survey, from a previously reported 64.5.
“The numbers are certainly consistent with an economy in recession,” a senior economist at UBS Securities LLC in Stamford, Conn., Jim O’Sullivan, said in an interview with Bloomberg Television. He said rising gasoline prices and a deteriorating job market hurt confidence this month.
Home prices will probably keep sliding as foreclosures push even more properties onto the market just as stricter lending rules limit the number of qualified buyers.
“This is just one more strain for consumers, in addition to high energy prices and tight credit,” an economist at Lehman Brothers Holdings Inc. in New York, Michelle Meyer, said. “Prices are going to continue to fall, probably through the end of next year.”
