Research >> Economics
Record Decline in University of Michigan Consumer Confidence
|
The October survey recorded the largest monthly decline in consumer confidence in the history of the surveys. “Consumer confidence had already declined by mid 2008 by more than prior to any past recession and the steep October loss indicates that accelerated cutbacks in spending can be expected during the months ahead,” according to Richard Curtin, the Director of the Reuters/University of Michigan Surveys of Consumers. Overall, the data indicate that this will be the bleakest holiday spending season since 1980. “Consumers held the least favorable assessments of their finances in more than a half century and viewed their job prospects more negatively than at any other time since the end of 1980,” according to Curtin.
The data indicate that a long and deep recession is likely to occur, with spending expected to decline through most of 2009. Consumers anticipated an unemployment rate reaching 8% by the end of 2009. Total real personal consumption expenditures are expected to fall by -0.50% to -0.75% in 2009 compared with 2008, followed by unusually slow paced recovery in 2010.
The Index of Consumer Sentiment was 57.6 in the October 2008 survey, a record 12.7 points below the 70.3 in September, and 23.3 points below last October’s 80.9. Since the cyclical peak was set in January 2007, the Sentiment Index has declined by 41%, the largest peak to trough decline in history. The Index of Consumer Expectations, a closely watched component of the Index of Leading Economic Indicators that is noted for its ability to foreshadow recessions, was 57.0 in October, down from 67.2 in September and 70.1 last October. The Expectations Index has decline by 35% since its January 2007 peak.
Posted: October 31, 2008 Friday 11:07 AM