Consumer Pessimism Sinks to 1970's Levels

Americans' expectations about the economy have plummeted to levels last seen during the oil embargo and Watergate, according to the Consumer Confidence Report released today by the Conference Board. The Expectations Index, which measures consumers' confidence that things will get better, declined to 47.9, down from 58 in February. In fact, it is at a 35-year low (Dec. 1973, 45.2). The Consumer Confidence Index, which is a composite of present and future confidence, now stands at 64.5, a five-year low.

Says Lynn Franco, Director of The Conference Board Consumer Research Center: "Consumers' confidence in the state of the economy continues to fade...Looking ahead, consumers' outlook...is quite pessimistic and suggests further weakening may be on the horizon. " (Source: Conference Board, Consumer Confidence Index, March 25, 2008)

What It Means to You

The Consumer Confidence Index is a lagging indicator. This means that most people don't feel the impact of what is happening with the economy until after it has already happened. The economy will probably start to improve before the Consumer Confidence Index reflects it.

High gasoline and food prices coupled with a declining housing market makes people feel poor. If this pessimism affects their spending habits, it could create a downward spiral, since 70% of the U.S. economy depends in consumer spending. Watch for upcoming retail and consumer spending reports to determine if this is the case.

Related Articles

• A Primer on the Role of Demand in the U.S. Economy
• What Consumers are Demanding
• Why You Are Working Harder, But Feel Like You Are Earning Less