Consumer Confidence Slips Again

It’s tough to have a vibrant economy when the people who comprise that economy are in a funk. So the news that consumer confidence has slipped a little more and is now below where it was at the beginning of the year is not good news.

The Conference Board calls the 48.5 reading for September on its overall confidence gauge as “quite grim”. This was a decline from the August reading of 53.2. The index has a base of 100 back in 1985, and has been bouncing around in the 40 to 60 range for about 18 months.

While consumer confidence is not an economic factor in the way that spending is, it does give us insight into the likely trajectory of those more direct measures of activity. So this period of decline so far in 2010 does not augur well for the near term. We should expect consumption to wallow in its current range and savings to track higher as households either hoard cash or pay down debt rather than spend.

If this turns out to be the case GDP will be weighed down and will also stumble along at an unacceptably low level.

Perhaps the most alarming aspect of today’s report was the number of people who are expecting things to deteriorate. Whether it is business conditions or the employment outlook respondents in September’s survey were appreciably more pessimistic than those a month earlier.

The lingering malaise shows no signs of abating.