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Consumer Confidence Hits 28 Year Low

Written By Brian Hicks

Posted May 30, 2008



Here’s more news from the consumer front.

Consumer confidence has fallen to its lowest point since 1980.

Here’s the skinny.

From Reuters by Burton Frierson entitled: Inflation outlook makes consumers’ mood grim

“U.S. consumer confidence fell to a 28-year low in May, a survey showed on Friday, as soaring prices for food and fuel soured sentiment and pushed long-term inflation expectations to the highest in more than a decade.

The rising expectations conflicted with a government report showing price growth moderated last month. Together, the reports heighten the challenge facing the Federal Reserve, which wants to avoid inflation perceptions becoming reality.

The Reuters/University of Michigan Surveys of Consumers confidence index fell to 59.8 in May, the lowest since 58.7 in June 1980. Its gauge of five-year inflation expectations rose to 3.4 percent, the highest since April 1995.

“Consumers are running scared. These price data are bad for consumers and businesses,” said David Wyss, chief economist at Standard & Poor’s Ratings Services in New York.

“We are not going to see the economy getting better any time soon. We are still in the early stages of the recession.”

The Fed has staked its monetary policy on the notion that the weak economy will put the squeeze on inflation, with consumers forced to rein in extra spending to keep pace with rising prices of necessities such as food and energy.

This would allow the central bank to keep interest rates low to spur future economic growth without fueling unwanted inflation.

However, any signs that prices are getting out of hand would require higher interest rates, which would pummel stocks and bonds.”


Stagflation anyone?