This time, it’s the AP’s turn to use the U-word, at least in the headline. Consumer confidence tumbled in April, not a surprising result for anyone paying attention to rising unemployment claims, rapidly rising gas prices, and the slowdown in durable-goods orders. The only people apparently surprised by this are the economists:
The Conference Board’s Consumer Confidence Index fell to 60.8 from a revised 66 in April, a sign of the toll that high gas prices, a choppy job outlook and a moribund housing market are taking on people’s psyches. Economists had expected an increase to 67. It was the lowest reading since November.
“Consumers are considerably more apprehensive about future business and labor market conditions as well as their income prospects,” said Lynn Franco, director of The Conference Board Consumer Research Center. She said fears over inflation, which eased in April, picked up again in May.
The index, released Tuesday, is still far from the reading of 90 that indicates a healthy economy. It hasn’t approached that level since the recession began in December 2007.
Increased worry about income and jobs coupled with high prices are taking a toll on consumers, said Moody’s Chief Economist John Lonski.
They seriously expected an increase? Durable goods orders dropped 3.6% in April in what should have been a gigantic clue of falling demand. It would be one thing to be surprised by another reflection of falling demand if it came before the first, but it would only have been “unexpected” had consumer confidence increased while demand fell.
Why are consumers losing confidence? One big reason might be the increased level of weekly initial unemployment claims seen since mid-April. On Friday, the Department of Labor will announce May’s unemployment rate, and the indications thus far suggest that the US economy didn’t add many jobs. On top of that, the valuation of the primary asset of most consumers keeps dropping: