Consumer confidence sinks to a five-year low

[marmar]

AP via Yahoo!:



By EILEEN ALT POWELL, AP Business Writer
50 minutes ago



NEW YORK - Consumer confidence sank to a five-year low in March as tight credit markets, rising prices and worsening job prospects deepened worries that the economy has fallen into recession.

The Conference Board, a business-backed research group, said Tuesday that its Consumer Confidence Index plunged to 64.5 in March from a revised 76.4 in February. The March reading was far below the 73.0 expected by analysts surveyed by Thomson/IFR.

Meanwhile, a widely watched index of U.S. home prices fell 11.4 percent in January, its steepest drop since data for the indicator was first collected in 1987. The decline reported Tuesday in the Standard & Poor's/Case-Shiller index means prices have been growing more slowly or dropping for 19 consecutive months.

The weak readings depressed share prices on Wall Street. The Dow Jones industrial average dropped 74.37, or 0.6 percent, to 12,473.91 in morning trading. The Standard & Poor's 500 index and the Nasdaq composite index also fell.

The Consumer Confidence Index has been weakening since July, and is watched because lower consumer confidence tends to result in lower consumer buying, which is a drag on the economy.

Lynn Franco, director of the Conference Board's research center, said the latest index reading was the lowest since 61.4 in March 2003, just ahead of the U.S. invasion of Iraq.

"Consumers' outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon," she added. .......(more)

The complete piece is at: http://news.yahoo.com/s/ap/20080325/ap_on_bi_ge/economy

[selador]

1. specifically

it has not been this low since 1974, 1980, 1990 and 2000

see: contrarian signals.

[slipslidingaway]

2. August 6, 2007 Strong economic optimism (... is a contrary indicator)

http://hussmanfunds.com/wmc/wmc070806.htm

"...Strong economic optimism (... is a contrary indicator)

Despite credit concerns, Wall Street remains exuberant about economic prospects. Last week brought a 6-year high in consumer confidence, evidently supporting the idea that the consumer remains strong and the economic expansion remains intact. Unfortunately, if you examine the data, you'll quickly discover that consumer confidence is a lagging indicator, well explained by past movements in GDP, employment, and capacity utilization. Worse, for the stock market, it's a contrary indicator (especially when it is well above the "future expectations" component of the same survey). This is a fact that I've noted at both extremes, not only in early 2000 when new highs in consumer confidence supported a defensive position, but conversely in the early 1990's, when new lows in consumer confidence supported a leveraged position in stocks (prompting that “lonely raging bull” comment in the L.A. Times)..."



http://www.contraryinvestor.com/2002archives/monov02.htm

November 2002

"...The "white noise" media was all aflutter, at least for a day or two, over the recent consumer confidence report. The fact is that recent trends were almost totally predictable and it's a very good bet based on past experience that we are still a good way off from the ultimate consumer confidence lows.

***see link for chart going back to 1969***


Not only has every meaningful consumer confidence cycle of the past three decade perceptual window ended somewhere a bit below the 60 range, but so has every meaningful equity bear market cycle. As you can see above, this chart has simply been uncanny in its ability to almost pinpoint significant equity bear market lows of the past 30+ years..."