In the wake of increased social security taxes and reduced pay checks, the nation’s consumer confidence has plummeted to its lowest level in more than a year, according to a Conference Board report.
Conference Board Consumer Confidence Survey
The Conference Board is an international organization that researches and reports information vital to the business community. It publishes a monthly Consumer Confidence Survey, keeping its finger on the pulse of consumers’ spending comfort.
Spending confidence lowest since Nov. 2011
According to its latest report — issued on Tuesday, January 29 — the confidence of American consumers slipped to 58.6 in January 2013. In December, that figure was 66.7. That is an 8.1-point drop. In fact, the number has not been that low since November 2011.
Below expectations of economists
The number is even lower than the projections of many economists. Guy Lebas, of Philadelphia’s Janney Montgomery Scott LLC, estimated the it would be closer to 61.6.
“The thing that’s particularly troubling is the sizable decline in expectations. As those expectations deteriorate, it doesn’t bode particularly well for day-to-day consumer spending,” Lebas said.
Consumer spending now drives about two-thirds of the American economy, experts say.
Lower take home pay spurs drop
The tumble in consumer confidence is being blamed on the lower totals American workers are seeing on their paychecks since the beginning of the year. That decrease is due to the increased Social Security taxes that resulted from the deal cut by Congress and the White House to prevent the “fiscal cliff” from raising the income tax liabilities of most Americans. Part of that compromise was a temporary increase in Social Security taxes.
The Conference Board conducted its survey on January 17, after many American employees had already received their first paychecks for the new year.
Nation’s economy to remain spongy
Economist also lack confidence that the nation’s economy will pick up much in the year’s first quarter.
The slip in consumer confidence coincides with many other promising signs of a recovering economy. The price of homes continues to go up, and auto sales climbed to a five-year high last year. Stocks are also up, and the Standard and Poor’s 500 is just short of the record high it posted six years ago.
However, the unemployment rate continues to hover at 7.8 percent. Until it begins to decline, the nation’s economy will remain soft, economists say.