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University of Michigan Consumer Confidence largely unchanged
Consumer confidence remained largely unchanged in March near the same record low levels recorded since last October. The good news is that the free fall in confidence has ended. The bad news is that consumers expect their financial situation to remain dismal for the rest of 2009. Consumers reported the largest two-month gain in confidence in the government’s economic policies, although consumers were still slightly more likely to rate economic policies unfavorably than favorably. Importantly, the stimulus package was expected by consumers to be more effective in aiding the general economy than in improving their own financial situation. Overall, consumers remained intent on increasing their saving and reserve funds even at the cost of not taking advantage of the deeply discounted prices that are now available.
The Index of Consumer Sentiment was 57.3 in the March 2009 survey, just below the 56.3 in February and well below last March’s 69.5 and the cyclical peak of 96.9 in January 2007. The Sentiment Index has averaged 58.0 in the past six months, which represents a record decline of 40% from its cyclical peak. The Index of Consumer Expectations, a closely watched component of the Index of Leading Economic Indicators, was 53.5 in March, up from 50.5 in February and nearly equal to last March’s 53.3, but substantially below the peak of 87.6 in January 2007.
The financial situation of consumers is dismal. The fewest consumers in the history of the survey reported that their finances had improved during the past year, with an all-time record number mentioning that their incomes had declined in the past year. Moreover, consumers anticipated the smallest annual income gains ever recorded—just 0.2%, down from 2.5% a year ago. Consumers favored saving a greater share of their incomes than they have in the past. Higher savings intentions were reported by four-in-ten consumers, and half of all consumers reported that they intended to reduce their debt during the year ahead.
Posted: March 27, 2009 Friday 10:00 AM