NEW YORK – Americans’ confidence in the economy has suffered a sudden relapse, dimming hopes that they will start spending — and spurring job growth — anytime soon.

The Consumer Confidence Index figures released Tuesday were much worse than analysts had expected and showed that Americans are morose about the job market and their economic prospects. That bodes ill for the sort of uptick in consumer spending that normally powers job growth, and could raise pressure on the Obama administration and Congress to create jobs themselves.

The index fell almost 11 points to 46 in February, down from a revised 56.5 in January and the lowest level since a 40.8 reading in April 2009. It erased three consecutive months of improvement, according to the Conference Board, the research group that releases the monthly index.

Analysts were expecting only a slight decrease to 55. Economists watch the confidence numbers closely because consumer spending accounts for about 70 percent of U.S. economic activity.

Outside of the Great Recession, the index hasn’t been this low since December 1974.

”It still feels like a recession,” said Lynn Franco, director of the Conference Board Consumer Research Center.

Advertisement

Confidence has been recovering fitfully since hitting a historic low of 25.3 in February 2009. Many economists believe it will remain well below healthy levels for at least another year or two. A reading above 90 indicates an economy is on solid footing. Above 100 signals strong growth.

Some economists say Americans won’t start to feel better and spend more until they see clear evidence of sizable job growth. In past recessions, however, the employment picture didn’t improve dramatically until after a recovery in consumer spending and confidence.

Many economists say business investments and exports can help drive the nascent turnaround in the short term, but a rise in consumer spending is essential to keep it going.

”Without a sustained acceleration in consumption growth, this recovery will eventually fade,” said Paul Ashworth, senior U.S. economist at Capital Economics Ltd.

Executives at discount chain Target Corp. said they expect the recovery to continue — slowly — as shoppers grapple with high rates of unemployment and pay down debt. ”I think we’re going to see two steps forward, one step back,” Gregg Steinhafel, Target’s chairman, president and CEO, said in a conference call with investors Tuesday.

The confidence index is based on a sample of 5,000 U.S. households surveyed between Feb. 1 and Feb. 17.

Advertisement

A surprising aspect of the report was that the index’s key gauge — consumers’ expectations over the next six months — took a big hit. The gauge had been on the rise since last October. Consumers’ assessment of the current economy slipped to a 27-year low.

Several factors may have aggravated the decline. Heavy snowstorms in many areas of the country may have dampened confidence as they shut down businesses and thwarted job searches. Worries about Greece’s national debt hammered the U.S. stock market.

Gary Thayer, chief economist at Wells Fargo Advisors, believes big improvements in jobs, confidence and spending will be ”marching together.”

”This is going to be a year when people are waiting to see what happens rather than assuming the best going forward,” he said.

 

Copy the Story Link

Only subscribers are eligible to post comments. Please subscribe or login first for digital access. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.