Consumer confidence plunges on worries about jobs, energy, housing

By JEANNINE AVERSA, Associated Press

Posted Saturday, January 12, 2008
WASHINGTON -- Consumer confidence plunged as worries about jobs, energy bills and home foreclosures darkened people's feelings about the country's economic health and their own financial well-being.

According to the RBC Cash Index, confidence tumbled to a mark of 56.3 in early January. That compares with a reading of 65.9 in December -- and a benchmark of 100 -- and was the worst since the index began in 2002.

"People are anxious because everything sounds pretty awful these days," said Bill Cheney, chief economist at John Hancock Financial Services Group.

Economists cited several factors for consumers' gloomy outlook:

•Hiring practically stalled in December, pushing the unemployment rate to 5 percent, a two-year high, the government reported last week.

•The meltdown in the housing market has dragged down home values and made people feel less wealthy.

•Harder-to-get credit has made it difficult for some to make big-ticket purchases.

•High energy prices are squeezing wallets and pocketbooks.

•There has been much hand-wringing on Wall Street and Main Street as to whether all these problems will plunge the country into recession.

"Consumers are gloomy. The confidence reading suggests that people believe bad times are upon us," said Richard Yamarone, economist at Argus Research.

Over the past year, consumer confidence has eroded sharply as housing and credit woes took their toll. Last January, confidence stood at a solid 95.3. The index is based on the results of the international polling firm Ipsos.

The White House is exploring a rescue plan, possibly including a tax cut, to aid the economy. Federal Reserve Chairman Ben Bernanke, criticized for not doing enough, pledged Thursday to keep lowering interest rates. They are expected to drop as much as one-half of a percentage point when Fed policymakers meet later this month.

The public is giving President Bush low marks for his economic stewardship. His approval rating on the economy dipped slightly to 33 percent in January, from 36 percent in December, according to a separate Associated Press-Ipsos poll. His overall job-approval rating was 34 percent, compared with 36 percent last month.

Individuals' sentiments about the economy and their own financial fortunes over the next six months actually fell into negative territory in early January. This gauge came in at a negative 8.2 percent. That was the weakest showing since right after the Gulf Coast hurricanes in August 2005.

Another measure looking at current economic conditions dropped to 78.9 in January. That was the lowest reading since early March 2003, when U.S. troops invaded Iraq.