Crisis of Confidence Hits Consumers

Been shopping lately? If so, you probably didn’t spend much. For several weeks, retailers have been saying anecdotally what was confirmed today by real data: consumers are cutting back – way back.

The Conference Board’s U.S. Consumer Confidence Index fell this month to its lowest level since the survey began in 1967. This is bad news because the economy depends heavily on consumer spending. My guess is that some of this is a result of the near-panic in the markets, and if the world keeps turning the fear will recede slightly. Nonetheless, it seems crystal-clear that trends are changing for the worse.

The domestic economy is like a line of dominoes. Once they start falling, the momentum is hard to stop. It’s no longer just a matter of the unemployed – though that group is growing quickly. Millions of the lay-off survivors are now wondering how long their own jobs will last. Those without substantial savings to fall back on are cutting back however they can. In so doing, they may bring on the very fate they wish to avoid.

On the other hand, returning to our previously-profligate spending levels is not the answer, either. The credit crunch is not an entirely bad thing, since as a society we have been over-leveraged for far too long. It would be nice to think we can have a “soft landing” once again, but that appears less and less likely. Fasten your seat belt – it’s going to get rough.
photo credit: Choctopus