U.S. Consumer Confidence Plunged to 16 Year Low

The Conference Board, a private business-backed research group, announced on June 24 that its index of consumer confidence for the month sank to a 16-year low. The drop in the U.S. consumer confidence index to 50.4 in June leaves the index only just above prior cycle-lows of 47.3 in February, 1992, and 50.1 in May, 1980.




Scarce jobs, enormous gas prices, higher food prices, sinking home values have shaken consumers. The plunge in the consumer confidence index shows also deepening worries about inflation. The U.S. consumer confidence report provided a few more fresh records of public dreariness over growth and inflation prospects. Lower consumer confidence tends to result in lower consumer buying, which is a drag on the economy further down.

Current pessimism is focused straight on economic and inflation developments, as was the case through the stagflation years of the 1970s and the difficult 1980-1982 period. Throughout the 2001 recession, in contrast, the confidence drop that year reflected pessimism associated with the September 11 terrorist attacks rather than the economy in specific. Likewise, in the 1990 recession, public pessimism reflected concerns about the impending Gulf War in the aftermath of Iraq's invasion of Kuwait.