Consumer Confidence Expected To Tank And Everyone WIll Blame The Snow Storms

shopper store


NEW YORK (AP) — A preliminary report on consumer confidence Tuesday is expected to show a slight decline after three straight months of improvement.

Economists surveyed by Thomson Reuters predict the February Consumer Confidence Index — due out from the Conference Board at 10 a.m. EST — will dip slightly to 55 from 55.9 last month as consumers navigate their way through a muddled economic recovery.

Another key factor behind the anticipated decline were the major snowstorms that hit much of the country earlier this month, leading to temporary shutdowns of businesses, according to Gary Thayer, chief economist at Wells Fargo Advisors.

“It’s been a tough winter,” Thayer said.

The February estimate would be a long way from what’s considered healthy: A reading above 90 means the economy is on solid footing. Above 100 signals strong growth.

The index hit a historic low of 25.3 in February 2009 but then enjoyed a three-month climb to 54.8 in May, fuelled by signs the economy might be stabilizing. Since then, it has been mired in a narrow range, dropping as low as 47, as rising unemployment took a toll, before climbing again for a three-month stretch.

The expected reading for February would be below the 61.4 figure in September 2008, when the financial crisis intensified with the collapse of Lehman Brothers. The index has had an average reading of 95.6 since the Conference Board starting tracking the figures in 1967.

Economists watch the confidence numbers closely because consumer spending on goods and services, including health care and other major expenses, accounts for about 70 per cent of U.S. economic activity as measured by the federal government.

Economists have been watching for signs of a consumer spending recovery, but Wal-Mart Stores Inc., the world’s largest retailer, said last week that economic conditions are not getting much better for its core customers. The strains show when paychecks or government payments are issued and spending spikes, indicating that people are waiting for those to be able to spend.

Analysts will be looking at more clues about spending behaviour from fourth-quarter reports this week from major retailers such as Target Corp., TJX Cos. and Saks Inc.

The overall economy expanded at an annual rate of 5.7 per cent in the fourth quarter, but only about one-fourth of that growth came from consumers. That marked the second quarterly increase in a row after four quarter of decreases. But continued high unemployment could lead consumers to further cut their spending, and that could dampen GDP growth.

“We don’t know what the ‘new normal’ will look like,” said Frank Badillo, senior economist at Retail Forward. “But we think it’s going to be a combination of old shopping habits and the newly acquired shopping habits that they learned from the recession.”

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