Consumer Confidence Keeps Falling

The Conference-Board's consumer confidence index fell to levels that indicate very weak employment conditions and an economic recession.

A decline in the expectations component was notable, as it fell to 47.9 from 58.0 in February. That's the lowest level since December 1973. The index on the consumers' assessments of present conditions was relatively stronger - at 89.2 - but that is still 14.8 points lower than in February. It is also the lowest reading since March, 2004.

Since expectations are extremely low relative to the consumers' assessments of the present, it will make it easier for confidence to turn when perceptions about the economy begin to shift.

The overall index fell to 64.5 compared to 76.4 in February, it's lowest level since March 2003. The consensus was for a reading of 73.5. The index went as low as 47.3 in the aftermath of the 2001 recession and to a low of 55.1 in the 1990-1991 recession.

Although the index in March fell far below the consensus forecast, it is not a major surprise given the decisive weakness seen recently in other consumer confidence indexes and employment figures. The Conference-Board's survey is important because it tends to better reflect the job market than other consumer confidence surveys. That's because two of its five survey questions relate directly to the labor market. Other confidence surveys ask about the job market only by inference.

In today's report, the consumers' assessment of the job situation worsened, with more respondents saying that jobs were hard-to-get than plentiful, by a spread of about 6.3 points, the most since December 2004.

The assessment of business conditions was extremely poor, with only 8.1% of respondents saying that business conditions will be better six months from now, the lowest tally ever dating back to 1967. Expectations that there will be more jobs fell to their lowest since 1980.

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Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic, The Money Market, first published in 1978 by Marcia Stigum, and The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.

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