Since October the Consumer Confidence Index has been trending downward.
While the economy may be on the upswing, consumer confidence is still heading in the opposite direction, according to a report Tuesday. Consumer sentiment declined in January for the second month in a row, according to the Conference Board.
The group’s Consumer Confidence Index plummeted 8.1 points in January to 58.6 from 66.7 in December. The baseline for the index is 100, which the Conference Board established in 1985 because the economy was neither in a peak nor a trough. Anytime the index is more than 100, consumers are showing optimism, but when the number falls below the baseline, consumers are pessimistic.
The most recent dip underscores the latter feeling, according to Lynn Franco, director of economic indicators at the Conference Board. Franco also attributed the dramatic drop to the reinstated payroll tax that is taking effect this month.
“It may take awhile for confidence to rebound and consumers to recover from their initial paycheck shock,” Franco said in a release.
Although the payroll tax may be playing a roll, economists are not so sure that it is entirely to blame for the dismal numbers. Robert Brusca of Fact and Opinion Economics thinks that a combination of economic forces is to blame.
“If we don’t look at our problems honestly we’re certainly not going to solve them,” Brusca said. “To me that’s the theme here. We have dishonesty in government and it becomes apparent the more we look at it. People are hurt and they’re confused.”
Brusca also thinks that these polls are tough to interpret because of the variety of factors involved.
“When it falls we look at all the compounds,” Brusca said. “And when people try to link it to an abstract economic event, everyone is making it up.”
The Conference Board surveys 5,000 households and asks respondents to give their opinions about current business conditions, business conditions for the next six months, current employment conditions and employment conditions for the next six months. The cutoff date for preliminary results was Jan. 17.
Most worrisome to Brusca is what consumers said they expect in the next six months. The survey’s index of consumer expectations took an 8.6-point dive in January to 59.5 from 68.1 the month before. It was the second month in a row that expectations dropped so consumers are sending a message, according to Brusca.
Although the overall survey shows consumer concern, Chicagoans do not seem all that worried. Mac Murray, who was on his way back to work after taking a lunch break Tuesday, said that because he has a job he is feels pretty good about the economy. “I guess I’m a little lucky,” Murray said. “I’m spending my money and buying stuff and making purchases for my home.”
Edmund Wisniewski, another Chicago consumer, said that he pays no attention to the status of the economy. “If it gets really bad something will come and fix everything up,” Wisniewski said. “It’s not really my worry.”
But as for spending, Wisniewski said he buys only what he needs when he needs it.
“I have nothing to spend my money on,” Wisniewski said. “My last big buy was a new computer. After I bought that I just haven’t had anything to buy so it’s just building up in my bank account.”