Consumers' Gloom Deepens in February

The plunge in the Conference Board's confidence gauge suggests more downside risk to February employment and consumption data

With a looming war, sluggish economy, and shaky labor market, a darkening outlook on the part of U.S. consumers would not be surprising. But the magnitude of the plunge in the Conference Board's widely followed consumer confidence gauge for February, released Feb. 25, came as quite a shock. The February reading plummeted to 64.0 from 78.8 in January, leaving the index near its lowest level in nearly nine years.

While the 15-point drop was much larger than expected, the level is not that surprising -- given that it leaves all of the consumer confidence measures hovering at the lowest levels since late 1993. Overall, the intense level of geopolitical risk, not to mention a sputtering economy, weakness in the stock market and surging energy prices, are clearly weighing on consumers' assessment of conditions.

The present situations component dropped to 61.6 from 75.3, while the expectations component plunged to 65.6 from 81.1. Also worth noting is that the "jobs plentiful" subcomponent dropped to a low last seen in late 1993.

Overall, the data suggest further downside risk to February employment and consumption data, which were already likely damped by the blizzard over the Presidents' Day weekend. Nonetheless, despite the near-term downside risk presented by the fear and pessimism evident in these data, the hope is that respectable trends in income growth, some stability in employment, and the surge in real-estate refinancings should still help support consumption in the first half of the year.

From MMS International staff analysts

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