Published October 28, 2009

LATEST US DATA
Jobs rut deepens US consumer gloom

October confidence index shows biggest fall in eight months

Email this article
Print article
Feedback
Bookmark and Share

(NEW YORK) US consumer confidence deteriorated sharply in October as the worst job market in a quarter century heightened concerns about the future, more than outweighing modest improvements in the housing sector.

Despite the stability in house prices, which saw a fourth month of gains in August, a report from The Conference Board suggested Americans are far from upbeat.

The industry group's confidence index dived to 47.7 this month from 53.4 in September, the biggest drop in eight months. The report was unequivocally weak, with the expectations index plunging to 65.7 from 73.7.

Persistent trouble in the labour market was a major culprit. The proportion of respondents saying jobs were hard to get rose to 49.6 from 47.0 per cent.

'Consumers' assessment of present-day conditions has grown less favourable, with labour market conditions playing a major role,' said Lynn Franco, director of The Conference Board Consumer Center Research.

'Consumers also remain quite pessimistic about their future earnings, a sentiment that will likely constrain spending during the holidays,' Ms Franco added.

'There really isn't any scope for us to see sustained gains in consumer spending for quite some time,' said Joshua Shapiro, chief US economist at Maria Fiorini Ramirez Inc, a New York forecasting firm. 'The labour market remains very weak.'



The current conditions indicator fell to 20.7, and is near its lowest level in 26 years. This mirrored the labour market, where the current jobless rate of 9.8 per cent is the highest since 1983.

At least home prices, battered by a severe recession in housing, appeared to be finding a footing. The Standard & Poor's Case/Shiller report on house prices showed its index of prices in 20 cities rose 1.2 per cent, outpacing median forecasts of economists polled by Reuters.

The rise helped moderate the year-on-year price decline, slowing it to 11.3 per cent.

'It does suggest there is some recovery going on,' said David Sloan, economist at 4Cast Ltd. 'It is possible the market is getting some temporary support from the temporary tax credit which may not last longer.'

'Broadly speaking, the rate of annual decline in home price values continues to improve,' David Blitzer, chairman of the index committee at S&P, said in a statement.

While the US housing market, a primary driver of the worst US recession since the 1930s, has found some footing after a three-year slump, it remains highly vulnerable to setbacks.

Mr Blitzer said the upcoming expiration of the government's US$8,000 tax credit for first-time home buyers on Nov 30 and anticipated higher unemployment rates through year-end could negatively impact home prices going forward.

'Both may have a dampening effect on home prices,' he said.

Furthermore, many analysts say prices are poised to fall again, with a new wave of foreclosures in the pipeline.

The composite index of prices in 10 metropolitan areas gained 1.3 per cent in August after a 1.7 per cent rise the previous month. The monthly price increases helped the annual rates, with the yearly pace of declines in home prices slowing to a 10.6 per cent drop in the 10-city index and a 11.3 per cent decrease in the 20-city index. -- Reuters, Bloomberg, AP