Consumer Confidence At 2 Year Low, Again

Another consumer confidence index has plummeted to its lowest post-Katrina level, and retailers are crying in dark corners of their bedrooms, waiting for the inevitable disastrous holiday season.

Newsweek has a 3 page article on why consumers are depressed, but you can probably already guess what factors they’re citing.

And yes, the term “perfect storm” was used.

Consumer confidence hits 2-year low [Newsweek] (Thanks, Molly!)
(Photo:swanksalot)

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  1. GoBobbyGo says:

    I know that picture. I used to bank there!

  2. Pinget says:

    I really hope everyone understands that the current administration is to blame for all this. They created these dodgy loans in a bid to increase home ownership. Thus, banks extended mortgages to people who had been, for very good reasons it turns out, renters. This here “ownership society” thing isn’t working out so good. Oh, and maybe regulating banks is a good idea, huh?

  3. mookiemookie says:

    Interest rates were so low that lenders couldn’t compete on the basis of who had the lowest rate, as margins were already razor thin. The only way to attract customers was to compete on the basis of documentation and how little of it was required. Add in a massive ad blitz pushing home loans on anyone and everyone, and then rising interest rates causing ARM payments to skyrocket and you have the current situation.

    To say that the current administration “created” these loans is ludicrous. I’m not fan of them, but let’s place the blame where it belongs, shall we?

  4. hey…is that mural from Chicago?

  5. BigNutty says:

    Does the average consumer pay any attention to the confidence index? I would think not, and for a business, it’s just another excuse to cry about their upcoming sales stats.

  6. Akamaru says:

    I understand that expectations affect the economy. But I find it funny that people use euphemisms like “slowing of the economy” instead of recession.

    The economy sucks right now and we’re trying to sugar coat that fact. A few people made out big in the subprime loan housing bubble, now everyone else is suffering. Whether you bought a house or not.

    This post 2001 depression, consumer driven economy has run out of gas (or should I say credit). That’s why consumer “confidence” is at a 2 year low.

    On the plus side, this may weed out all the crappy businesses which show nothing but contempt for their customers.

  7. Adam291 says:

    Does this mean people will finally stop buying shit they don’t need, which mostly comes from China and slave labor factories? Will America finally become responsible with their money? Will they actually start saving some money?

  8. ARP says:

    Here is my prediction, consumer spending will be stagnant or slightly up. It will be disappointing but not the big drop that some are expecting. We’ve become so accustomed to our “lifestyle” that I think we’ll finance this holiday season. Our savings rate will go further in the red. There will be a slight uptick for post holiday bargain hunters, but once the credit card hangover kicks in, spending will drop below the historical lows and stay there for a long time.

  9. ARP says:

    PETRARCH1603- Yes, I belive its on LaSalle street, a few blocks North of the Board of Trade.

  10. Pinget says:

    Hey Mookie- From Jan 20,2004

    Bush seeks to increase minority homeownership
    By Thomas A. Fogarty, USA TODAY
    In a bid to boost minority homeownership, President Bush will ask Congress for authority to eliminate the down-payment requirement for Federal Housing Administration loans.
    In announcing the plan Monday at a home builders show in Las Vegas, Federal Housing Commissioner John Weicher called the proposal the “most significant FHA initiative in more than a decade.” It would lead to 150,000 first-time owners annually, he said.

    Nothing-down options are available on the private mortgage market, but, in general, they require the borrower to have pristine credit. Bush’s proposed change would extend the nothing-down option to borrowers with blemished credit.

    The FHA isn’t a direct lender, but guarantees loan payments for mortgages on moderately priced owner-occupied property. The FHA guarantee now permits private lenders to finance as much as 97% of the purchase price of a home for millions of low- and middle-income borrowers.

    In the proposal soon to be delivered to Congress, Bush would allow the FHA to guarantee loans for the full purchase price of the home, plus down-payment costs. As a practical matter, the FHA would guarantee mortgages as high as 103% of the value of the underlying property. [www.usatoday.com]

  11. mookiemookie says:

    “But I find it funny that people use euphemisms like “slowing of the economy” instead of recession.”

    Well, that’s what it is. GDP is still positive, but just not as positive as it was before. Hence a “slowing” of the economy. The textbook definition of a recession is two or more consecutive quarters of negative GDP growth. That hasn’t happened yet.

  12. MENDOZA!!!!! says:

    @Pinget: good thing you managed to clear all this up with a giant political generalization. I hadn’t heard that Bush was making investment firms overweight on CMOs and ABSs. Thanks for clearing that up.

  13. MENDOZA!!!!! says:

    so does this mean less burritos?
    /inspred by Meg’s last Consumer Confidence post

  14. MYarms says:

    What do retailers care? Americans are still gluttons and will continue to spend every last dollar they have so their kids can have a decent christmas. Its not the end of the retail world.

  15. Starfury says:

    My kids are getting a Wii and extra controller for Christmas and that’s all that Santa/us are getting them. We’re not exchanging gifts since we already went on a cruise and bought a new camera for the trip.

    As for in-laws: we exchange names so that’s about $150 and my parents get something and that’s all.

  16. mookiemookie says:

    Pinget – In 2006, FHA made up less than 2% of all the loans originated in the US.

  17. GoBobbyGo says:

    @ARP
    To be specific, it’s right across the street from City Hall.

  18. Beerad says:

    @Starfury: That’s ALL? No offense, but Santa better hook them up with Super Mario Galaxy or Metroid too. WiiSports is cool, but come on, at least one more game for variety! Still, good on ya for getting your kids an awesome gift.

  19. SaraAB87 says:

    Spending won’t bottom out until after christmas when everyone puts themselves in debt so their kids can have a nice christmas. If people don’t have money then they will buy on credit, simple as that. Even though everyone says spending will be down this holiday season from the looks of the shopping carts and people carrying bags in malls and stores here, spending is about the same that its been every holiday season. Its in the after christmas months when the retailers will feel it harder…

    The day I see people telling kids they don’t need “it” in stores instead of buying them everything they point to on the shelves that they want and the day that each person in retail store x doesn’t have 3 carts filled up with christmas gifts is the day I will believe spending is down..

  20. theblackdog says:

    Did anyone else notice the article link starts on page 2?

    As someone who is contributing to these low numbers by not financing his Christmas except with cash, they’re really not going to like me.

  21. ElizabethD says:

    Someone please ‘splain that mural! It’s making me seriously LOL.

    When does the recession start? How will we know?

  22. ARP says:

    ELIZABETHD- not sure if you’re kidding or not. If you’re not, its a mural in Chicago of the Greek Legend of Icarus. Long story short, a man an his son(?) build a pair of wings out of feathers, wax and whatnot. Father says don’t fly too close to the Sun (meaning too high). Son ignores father and flies all crazy like. Wax, glue, etc. melt, wings, come apart and he falls to earth. It’s essentially a lesson again hubris and taking unneeded risks.

    Oh and I believe a recession officially starts when you have two quarters of negative growth of the GDP. But there’s some debate over when it unofficially happens.

  23. kc-guy says:

    Anyone think that the “leaks” of Black Friday circulars are intended to drum up sales for what can reasonably be expected to be a down year? Sure there are hundreds of people living on credit, but with so many mortgages in default, credit card limits have to be pretty close to maxing out.

  24. barty says:

    @Adam291:

    Very good points. Our dollar is in the crapper because we won’t stop buying crap with credit we can’t pay off. It doesn’t take a genius to figure out that when you’re spending so much money that it isn’t going into savings.