U.S. consumer confidence in May 2008 plunged to its lowest level in almost 28 years, an indication American adults are very concerned about the near-term health of the U.S. economy as it slides into its first recession in six years.
The Reuters/University of Michigan Surveys of Consumers said its index of confidence fell to 59.5 in May 2008, Reuters reported Friday.
It was the index's lowest reading since June 1980 -- a period also characterized by high oil/gasoline prices and a sluggish U.S. economy.
Economists surveyed by Bloomberg News had predicted that the April 2008 index would fall to 62.5. The index stood at 63.2 in April 2008 and 69.5 in March 2008.
'An awful number'
Economist Peter Dawson told BloggingStocks Friday May's consumer sentiment reading reflects conditions on the ground. "It's an awful number, but it reflects conditions on Main Street, as the typical person experiences them," Dawson said. "We've got falling home prices, record-high gas prices, rising food prices, property taxes increasing in many areas, and no job growth. It's not a happy time for Americans right now and the University of Michigan sentiment numbers reflect that."
Further, Dawson said even though the U.S. economy is exhibiting what he called "glimmers" of recovery, negative consumer sentiment could delay that much-sought rebound.
"Historically, a cautious stance by consumers will delay decisions, decisions to purchase a home, modernize a kitchen, buy a new big-ticket appliance, buy a computer. Multiply the above by the millions and you can see how it can depress [U.S.] GDP," Dawson said. "Consumers tend to wait until they see several months of signs of a rebound, we're nowhere near that, so a recovery is not close."
Dawson added that there's now a better than 50/50 chance the U.S. recovery will not begin until early 2009. "I am hopeful that the tax rebate [U.S. economic stimulus] checks will pick up demand in the second half of the year, but the empirical side of me says the fiscal stimulus probably won't be large enough to offset the housing recession," Dawson said. "I hope I'm wrong."
