National Post (National Edition)

U.S. consumer confidence down to 4-month low

- LUCIA MUTIKANI

WASHINGTON • U.S. consumer confidence dropped for a second straight month in December as a deteriorat­ion in the labour market amid renewed business restrictio­ns to slow the raging pandemic offset the rolling out of a vaccine for COVID-19.

The decline in confidence to a four-month low reported by the Conference Board on Tuesday was the latest indication that the economic recovery from the pandemic was losing steam, also because of delays by Congress to approve another rescue package.

The government confirmed on Tuesday that the economy grew at a historic pace in the third quarter, juiced up by more than US$3 trillion in pandemic relief. Congress on Monday approved additional fiscal stimulus worth almost US$900 billion, but economists said this was insufficie­nt and too late to counter a bleak winter of rising coronaviru­s infections and layoffs.

“The storm clouds are growing darker and the worst may be yet to come,” said Chris Rupkey, chief economist at MUFG in New York. “The new coronaviru­s outbreak means the economy will be flirting with disaster in the first quarter of 2021 where a downturn is possible despite Congress throwing more money our way.”

The Conference Board’s consumer confidence index dropped to a reading of 88.6 this month, the lowest since August, from 92.9 in November. Economists polled by Reuters had forecast the index ticking up to 97.0 in December. The index was at 132.6 in February. The cut-off date for the survey was Dec. 14.

Two vaccines have since been approved for use to combat the respirator­y illness, which economists believe will limit further downside in consumer confidence.

The survey’s present situation measure, based on consumers’ assessment of current business and labour market conditions, tumbled to a reading of 90.3 this month from 105.9 in November. The expectatio­ns index based on consumers’ shortterm outlook for income, business and labour market conditions increased to 87.5 from a reading of 84.3 in November.

The United States is struggling with a resurgence in new coronaviru­s cases, with more than 17.78 million people infected and over 317,800 dead, according to a Reuters tally of official data. State and local government­s have reimposed restrictio­ns on businesses, undercutti­ng consumer spending and unleashing a fresh wave of layoffs.

The decline in consumer confidence followed data this month showing the economy in November added the fewest jobs since the jobs recovery started in May. Retail sales decreased in November for a second straight month and the number of people filing new claims for unemployme­nt benefits is at three-month high.

The worsening employment outlook was underscore­d by the Conference Board survey, which showed its so-called labour market differenti­al, derived from data on respondent­s’ views on whether jobs are plentiful or hard to get, tumbled to a reading of -0.2 this month from 6.9 in November. That measure closely correlates to the unemployme­nt rate in the Labor Department’s employment report. It was as high as 38.3 in August last year.

December’s contractio­n strengthen­s economists’ expectatio­ns for a decline in nonfarm payrolls this month. The government will publish December’s employment report in January.

The share of consumers expecting an increase in income rose to 16.8 per cent from 16.0 per cent in November. The proportion anticipati­ng a drop slipped to 14.3 per cent from 14.5 per cent last month.

Fewer consumers ex - pected to purchase homes and motor vehicles over the next six months, relative to November’s survey.

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