Consumer Confidence Hits 7-Month Low
By JEANNINE AVERSA AP Economics Writer
© 2006 The Associated Press
WASHINGTON — Consumer confidence sank to a seven-month low as sticker shock from rising gasoline prices made Americans anxious about the economy's prospects and the strain on their own budgets.
The RBC CASH Index, based on results from the international polling firm Ipsos, showed confidence at 67.1 in early May. That marked a big deterioration from 89.4 in April.
The new confidence reading was the lowest since October, when the country was still reeling from the devastation and fallout wrought by the Gulf Coast hurricanes, including high energy prices.
"Whenever we get big spikes in oil and gasoline prices it takes a toll on consumer confidence," observed economist Ken Mayland, president of ClearView Economics.
The latest confidence snapshot came as high energy prices have touched off fresh debate on Capitol Hill, at the White House and elsewhere about what can be done to help the situation.
Oil prices topped $75 a barrel, a record high in late April. The confidence reading for April was taken before that run up. Oil prices, which have been gyrating since then, were hovering below $70 a barrel on Thursday. Gasoline prices at the pump have marched higher and are above $3 a gallon in some areas.
President Bush's job-approval rating, meanwhile, is now at 33 percent, the lowest in AP-Ipsos polling.
The confidence index is benchmarked to a reading of 100 on January 2002, when Ipsos started the gauge.
One of the areas where consumers expressed the most angst in May involved their expectations about the next six months _ including conditions where they live or work and their own financial positions.
This expectations measure cratered to 6.3 in May _ a steep slide from April's reading of 56.9. It was the worst showing since October, when the expectations gauge posted a tiny increase after falling into negative territory for the first time ever in September.
Economists blamed most of the drop in the May expectations measure to concern that energy prices could move even higher.
"People think, `Oh my God, I'm paying $3 a gallon now.' Then when they look out into the future and they think it may be $4 a gallon. It is particularly depressing," said Bill Cheney, chief economist at John Hancock Financial Services.
Concerns about the direction of the housing market, which is cooling after setting record-high sales five years running, may be another factor weighing on consumer confidence, economists said.
Analysts track consumer confidence for clues about consumers' willingness to spend, an important force shaping overall economic activity.
So far, high energy prices haven't daunted shoppers. Major retailers reported strong sales figures for April on Thursday.
The economy is expected to log growth in the 3 percent range in the April-to-June quarter, which would still be healthy but would be a moderation from the brisk 4.8 percent pace registered in the January-to-March period.
Economists believe consumers will be more cautious in the second quarter but they don't foresee them dramatically scaling back.
"There will be a certain amount of economizing," said Mayland. "But history teaches us that consumers would sooner cut back on their savings rather than cut back significantly on their spending to sustain their lifestyles."
Consumers' feelings about current economic conditions dipped to 90.3 in May, from 98 in April.
Another measure tracking consumers' sentiments about making a purchase, saving and other investment decisions dropped to 79.9 in May, compared with 86.7 in April.
And, peoples' confidence in the job climate came in at 110.3 in May. While that is down compared with April's reading of 124.5, it is still a good showing.
The RBC consumer confidence index was based on responses of 1,000 adults surveyed Monday through Wednesday about their attitudes on personal finance and the economy. Results of the survey had a margin of error of plus or minus 3 percentage points.
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