Consumer Confidence Drops Further (AP) (08-02-2008)

WASHINGTON (AP) -- The public’s confidence in the economy has dropped further as concern increases about shrinking job opportunities and the possibility the country is falling into recession.

The RBC Cash Index shows that confidence declined to a mark of 48.5 in early February, from 56.3 last month, making this the worst reading since the index began in 2002, surpassing the previous low reached in January.

It seems that despite the forcefulness of the Federal Reserve Chairman in cutting interest rates to induce people to buy more and bolster the economy by 1.25%, its most aggressive rate reductions in two decades, confidence continues to fall.

In an effort to help avoid a recession in an election year, the White House and Congress, meanwhile tried to energize the economy by giving rebates to people and tax breaks to businesses. Congress passed an emergency plan Thursday that sends rebates to most taxpayers in an effort to spark the economy. President Bush has indicated he would sign the measure.

Still, an increasing number of economists worry that the rescue efforts by the Fed and the politicians may not be enough to avert the first nationwide recession since 2001. Some economists believe the economy has already toppled into a recession.

Among the main sources of anxiety are: a weakening job market and slowing wage growth; a housing slump that continues to drag on. On top of those, high energy and food prices are squeezing budgets and turbulence on Wall Street is shrinking nest eggs. All these things are making people feel more insecure about their own financial fortunes and more concerned about the direction of the economy as a whole.

Over the past year, consumer confidence has deteriorated a lot, underscoring the toll of the housing collapse and a credit crunch that has made it harder for people to secure financing for big-ticket purchases such as homes, cars and appliances. Last February, confidence stood at a buoyant 103. The index is based on results of the international polling firm Ipsos.

Shoppers are showing signs of pulling back, as reflected in the weakening sales of the likes of Wal-Mart Stores Inc., the world's largest merchant.

The RBC consumer confidence index was based on the responses from 1,006 adults surveyed Monday through Wednesday about their attitudes on personal finance and the economy. Results of the survey had a margin of sampling error of plus or minus 3 percentage points. The overall confidence index is benchmarked to a reading of 100 in January 2002, when Ipsos started the survey.

Source: AP