Consumer Confidence Dropped Sharply in November, Conference Board Says

On Tuesday, the Conference Board released its latest Consumer Confidence Index. The Index has been declining since the summer and it declined yet further from October to now.

The monthly Consumer Confidence Survey is based on a representative sample of 5000 U.S. households, and is conducted for The Conference Board by TNS, the world's largest custom research company.

For the purposes of the Index, scores of 1985 = perfect and complete consumer confidence.

The Index at the time of this writing stands at 87.3, down from 95.2 in October. The Present Situation Index fell to 115.4 from 118.0 in October. The Expectations Index fell to 68.7 from 80.0.

The proportion of those consumers surveyed who are expecting business conditions to worsen increased in November to 16.7% from 13.9%. Those anticipating business conditions to improve fell to 12.4% from 14.0%. The proportion of those consumers expecting their incomes to decrease in the months ahead increased to 11.0%, from 9.1% in October.

However, those who are finding jobs "hard to get" edged down to 21.3% from 22.8%.

"Consumers' apprehension about the short-term outlook is being fueled by volatility in financial markets, rising prices at the pump, and the likelihood of larger home heating bills this winter...and a larger percentage than last month expect stock prices to decline. The Present Situation Index, despite losing ground, still suggests the economy is expanding, albeit slowly. Despite this rather bleak outlook, consumers have not lost their holiday spirit," said Lynn Franco, Director of The Conference Board Consumer Research Center.

Economists on the whole did not expect consumer confidence to fall as far as it did from October to now, and most say that still-falling home prices are most to blame. Home prices dropped a 19-year-record 4.5% from what they were one year ago.

Many leading economists are still predicting that consumer spending is going to be pulled back sharply, although other surveys have found that at least through the end of 2007 spending will increase as consumers expect to spend even more on holiday gifts this year than they did last year.

Some leading economists have said that as a result, the Federal Reserve should take action to cut interest rates even more. However, cuts in interest rates by the central bank lead to a decline in the value of the Dollar on global currency markets, and make it more expensive for Americans to travel overseas or buy imported goods. At the same time, American exports see their sales rise as U.S. goods become easier to buy for overseas consumers whose currencies are stronger than the Dollar.

The total value of non-commercial private property in the U.S. is now projected to fall by $1.2 trillion next year if the housing price trend continues. However, some leading experts are saying that what is most needed to stop the plunge is a more positive attitude by consumers; it is actually consumer pessimism now that is continuing to cause the plunge to deepen.

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