Consumer confidence approaches two-year low

Posted Dec 7th 2007 9:44AM by Eliza Popescu
Filed under: Bad News, Consumer Experience, Economic Data, Housing, Federal Reserve

Consumer confidence nearly hit a two-year low as consumers had to face a slumping housing market, tighter credit conditions and higher energy prices. The RBC Cash Index showed that December confidence fell to 65.9, close to a level of 64 in November, which was the worst reading since 2005 when consumer confidence dropped under the Gulf Coast hurricanes devastations.

According to economist Ken Mayland, president of ClearView Economics, consumers are facing "a great deal of fear and foreboding." The overall economy put pressure on consumers' confidence which has deteriorated sharply over the past year. In the month of December of last year, the Index reflected a solid reading of 86.9. Its level fell during the past year, hurt by the housing market collapse, higher home foreclosures, and harder-to-get credit.

The RBC Cash Index is not the only indicator that increases investors' concerns about a possible recession. In the month of November, individuals' sentiments about the economy's prospects and their own financial fortunes showed a negative level, with a reading of minus 4.3. Another measure for current economic conditions also slipped from 90.3 in November to 85.3 in December.

All these results raised economists' worries that consumers might lower their spending and investing, causing a recession for the economy. But, there are still hopes that the Fed will avoid such a situation by cutting interest rates for the third time this year.

Eliza Popescu is a financial writer for the online investment advisory service Investor's Observer.

Tags: consumer confidence, ConsumerConfidence, consumers, credit crisis, CreditCrisis, Fed, housing market, HousingMarket, inthenews, Ken Mayland, KenMayland