Public’s feelings about economy are bleakest since ’73, survey indicates Americans are bracing for rising unemployment and shrinking salaries, a gloomy outlook that could translate into a serious cutback in consumer spending, the primary engine of the economy.
A survey of about 2,500 households found that Americans feel worse about the economy’s prospects than at any time since 1973, when Americans struggled with soaring oil prices and runaway inflation.
Fears often prove overblown, of course, and this particular survey, released Tuesday by the Conference Board, has a spotty track record as an indicator. But expectations can often be self-fulfilling: Worried consumers are less likely to make the big purchases that help keep the economy humming.
With home prices falling at record rates, Americans are also finding it more difficult to draw on their home equity, further depressing their spending power. A separate report Tuesday said the value of single-family homes in major metropolitan areas plummeted 10.7 percent in January from a year earlier, the steepest annual decline since the height of the 1990s housing slump.
The proportion of those who expect their incomes to rise over the next six months dropped to 14.9 percent, the lowest level since the Conference Board began its survey in 1967.
Still, some economists said the report may represent the worst of the current downturn, rather than a harbinger of more pain to come.
“Typically, these readings look the worst when the economy is bottoming,” said Michael Darda, chief economist at MKM Partners, a research and trading firm. He said that on average, the stock market has risen substantially in the six months after Americans’ economic expectations bottom out.
Overall, consumer confidence in March stood at a five-year low, the Conference Board said. The results echoed a separate consumer survey by the University of Michigan and Reuters, which reached a 16-year low in March.
Home values are also falling at a rapid rate, according to the closely watched Standard & Poor’s Case-Shiller index, which on Tuesday released its latest survey of home prices in 20 metropolitan areas.
In January, all 20 regions recorded price declines, with the steepest losses in Las Vegas, Phoenix and Los Angeles. Overall, prices dipped 2.4 percent in January, after falling 2.1 percent a month before. Houston was not listed in the report.
The weak readings initially depressed Wall Street, but trading later flattened out.
The Dow fell 16.04, or 0.13 percent, to 12,532.60. The blue chip index was actually the laggard in Tuesday’s session – the broader Standard & Poor’s 500 and Nasdaq composite indexes had more robust gains. The S&P rose 3.11, or 0.23 percent, to 1,352.99; the Nasdaq added 14.30, or 0.61 percent, to 2,341.05.
By MICHAEL M. GRYNBAUM
New York Times
March 25, 2008, 9:57PM
The Associated Press contributed to this report.
Source: Houston Chronicle