Friday, May 24, 2013
The Associated Press
In this Wednesday, Dec. 12, 2012, photo, a couple descend an escalator while shopping at an H& M store, in Atlanta. U.S. consumer confidence tumbled in December, driven lower by fears of sharp tax increases and government spending cuts set to take effect next week. The Conference Board said Thursday that its consumer confidence index fell this month to 65.1, down from 71.5 in November. That's second straight decline and the lowest level since August. (AP Photo/David Goldman)
WASHINGTON — U.S. consumer confidence tumbled in December, driven lower by fears of sharp tax increases and government spending cuts set to take effect next week.
The Conference Board said Thursday that its consumer confidence index fell this month to 65.1, down from 71.5 in November. That's the second straight decline and the lowest level since August.
The survey showed consumers are slightly more optimistic about current business conditions and hiring. But their outlook for the next six months deteriorated to its lowest level since 2011.
Lynn Franco, the board's director of economic indicators, said the decline in expectations for the next six months is a signal that consumers are worried about the "fiscal cliff." That's the name for the automatic spending cuts and tax hikes that take effect Jan. 1 if the White House and Congress can't reach a budget deal.
A separate survey released last week by the University of Michigan showed consumer confidence fell in December to a five-month low. And a report from MasterCard Advisors Spending pulse indicated holiday sales grew in the two months before Christmas at the weakest rate since 2008, when the country was in a deep recession.
The December drop in confidence "is obvious confirmation that a sudden and serious deterioration in hopes for the future took place in December — presumably reflecting concern about imminent 'fiscal cliff' tax increases," Pierre Ellis, economist with Decision Economics, wrote in a note to clients.
Stocks fell sharply after the consumer confidence report was released at 10 a.m. The Dow Jones industrial average dropped 94 points in late-morning trading. It had been wavering between small gains and losses before the report was public at 10 a.m. Broader indexes also declined.
Investors may have also reacted to comments from Senate Majority Leader Harry Reid, who spoke shortly after the poor consumer confidence survey was made public. Reid, D-Nev., warned that the government appears to be headed over the "fiscal cliff" because talks had gone nowhere.
Negotiations between President Barack Obama and House Republican leaders on a package to avert the sharp tax increases and spending cuts reached an impasse last week. Obama and congressional lawmakers return to Washington Thursday to resume talks with just days to go before the deadline.
Treasury Secretary Timothy Geithner added pressure to the talks Wednesday by alerting Congress that the government was on track to hit its borrowing limit on Dec. 31. He said Treasury would take "extraordinary measures as authorized by law" to keep the government operating for another couple of months.
The Conference Board index has risen from an all-time low of 25.3 touched in February 2009. It remains well below the level of 90 that is consistent with a healthy economy. It last reached that point in December 2007.
Although consumers are more worried about where the economy is headed, they were upbeat about present conditions, according to the latest survey.
Their assessment of current economic conditions rose this month to the highest level since August 2008. Falling gasoline prices, which hit 2012 low of $3.21 a gallon last week, have brightened the mood somewhat.
Other reports Thursday show the economy is improving. The average number of people filing for unemployment benefits over the past month fell to the lowest level since March 2008, the Labor Department said.
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