US consumer confidence hits 16-year low

WASHINGTON, May 27: US consumer confidence plunged to a 16-year low in May amid a stuttering economy and as surging oil prices pushed inflation expectations to an all-time high, The Conference Board reported on Tuesday.

The business research firm said its index of consumer confidence, which has slid all year, fell to 57.2 from 62.8 in April.

Most analysts expected a reading of 61.

The April reading of the consumer confidence index was revised slightly higher to 62.8, from an initial estimate of 62.3.

The index is seen as a gauge of future consumer spending, the driver of two-thirds of US economic activity. The last time the index was lower was in October 1992, when it stood at 54.6.

“Weakening business and job conditions coupled with growing pessimism about the short-term future have further depleted consumers’ confidence in the overall state of the economy,” said Lynn Franco, director of The Conference Board consumer research centre.

“Consumers’ inflation expectations, fuelled by increasing (gasoline) prices at the pump, are now at an all-time high and are likely to rise further in the months ahead,” she said.

Both major components of the index dropped sharply in May. The present situation index, which measures how consumers feel about current conditions, fell to 74.4 from 81.9, a new low for the cycle.

The expectations index, which measures consumers’ outlook for the next six months, fell to 45.7 from 50.0, also a low for the cycle.

The expectations index suggests “little likelihood of a turnaround in the immediate months ahead,” Franco said.

In the monthly survey, consumers expected inflation to hit 7.7 per cent in May 2009, up from a 12-month expectation of 6.8 per cent in April.

Twenty-eight per cent of those polled said jobs are “hard to get,” almost unchanged from 27.9 per cent in April, while those saying jobs are “plentiful” declined to 16.3 per cent from 17.1 per cent.

Consumers expecting business conditions to worsen over the next six months rose to 33.6 per cent from 27.4 per cent, while those anticipating business conditions to improve edged up to 10.4 per cent from 10.1 per cent in April.

In another sign of flagging confidence amid the economic slump, the Wells Fargo/Gallup index, a quarterly confidence measure of small-business leaders, plunged to 48 in April from 83 in January. It was the lowest reading since the index started in August 2003.

Battered by the worst housing slump in decades, tight credit and high oil prices, the world’s biggest economy has stalled to a scant 0.6 per cent growth pace in the past two quarters.