WASHINGTON (AP) â¿¿ U.S. consumers' confidence in the economy likely stayed low in January, reflecting an increase in Social Security taxes that is leaving most Americans with less take-home pay this year.
Economists forecast that the Conference Board's confidence index was 65.0 in January, according to a survey by FactSet. That would be essentially unchanged from the December reading of 65.1. And it's below levels from the fall that suggested a brightening outlook.
The confidence index tumbled in December, as many Americans worried about sharp tax increases that were set to take effect in 2013.
Congress and the White House reached a deal on Jan. 1 to prevent income taxes from rising on most Americans. But they allowed a temporary cut in Social Security taxes to expire. For a worker earning $50,000 a year, take-home pay will shrink by about $1,000.Taxes are rising at a time when wages and salaries are growing at sluggish levels. Many economists predict economic growth slowed in the October-December quarter to an annual rate of around 1 percent. That would be much weaker that the 3.1 percent rate in the July-September quarter. And most don't expect growth to pick up much in the first quarter of 2013 because the tax increase will dampen consumer spending, which drives 70 percent of economic activity. The decline in confidence comes as the economy is signaling improvement elsewhere. A recovery in housing market is looking more sustainable and is expected to strength this year. Auto sales reached a five-year high of 14.5 million in 2012. Analysts expect sales will climb even higher this year, to 15.5 million. Stocks are also near their all-time highs. The Standard and Poor's 500 has more than doubled from its low in 2009 and is just 4 percent shy of its record high set in 2007.