Consumer Confidence Plunges to Two-Year Low
WASHINGTON -- Consumer confidence plunged to its lowest level in two years as the holiday season failed to lift the spirit of Americans rattled by stock-market volatility and mounting fears of a significant economic slowdown.</br></br>The Conference Board said consumer confidence slid to 128.3 in December from a revised 132.6 a month earlier. The November reading was initially estimated at 133.5. December's decline marked the third consecutive decrease in the closely watched index, which has lost 14 points since September. The reading compares results with its base year of 1985 when the index was 100. A sharp decrease in household expectations about the future health of the economy accounted for much of the drop.</br></br>The New York business-research firm's data are the latest in a string of reports that depict an economy slowing more sharply, and more quickly, than anticipated. The cooling economy has led the Federal Reserve to formally identify slower growth, not inflation, as the biggest current threat to the economy, and analysts expect the central bank to begin cutting interest rates next year to spur growth.</br></br>Although most sectors of the economy have begun to slow, the drop in consumer confidence is especially troubling because household fears about a recession can become a self-fulfilling prophecy. Consumer spending accounts for nearly two-thirds of the nation's total economic activity; shrinking consumer confidence would probably cause spending to slow. A sharp drop-off in spending then could turn a relatively soft landing into a much bumpier one.</br></br>That prospect was very much on the minds of Conference Board officials, who described the fall in confidence as "somewhat disconcerting."