Consumer confidence falls on fears of fiscal cliff
Washington - U.S. consumer confidence tumbled in December, driven lower by fears of sharp tax increases and government spending cuts set to take effect next week.
The Conference Board said Thursday that its consumer confidence index fell this month to 65.1, down from 71.5 in November. That's the second straight decline and the lowest level since August.
The survey showed consumers are slightly more optimistic about current business conditions and hiring. But their outlook for the next six months deteriorated to its lowest level since 2011.
Lynn Franco, the board's director of economic indicators, said the decline in expectations for the next six months is a signal that consumers are worried about the "fiscal cliff." That's the name for the automatic spending cuts and tax hikes that take effect Jan. 1 if the White House and Congress can't reach a budget deal.
A separate survey released last week by the University of Michigan showed consumer confidence fell in December to a five-month low. And a report from MasterCard Advisors Spending pulse indicated holiday sales grew in the two months before Christmas at the weakest rate since 2008, when the country was in a deep recession.
The December drop in confidence "is obvious confirmation that a sudden and serious deterioration in hopes for the future took place in December - presumably reflecting concern about imminent "fiscal cliff' tax increases," Pierre Ellis, economist with Decision Economics, wrote in a note to clients.
The Conference Board index has risen from an all-time low of 25.3 touched in February 2009.
It remains well below the level of 90 that experts say is consistent with a healthy economy.
It last reached that point in December 2007.
Although consumers are more worried about where the economy is headed, they were upbeat about present conditions, according to the latest survey.
Their assessment of current economic conditions rose this month to the highest level since August 2008. Falling gasoline prices, which hit 2012 low of $3.21 a gallon last week, have brightened the mood somewhat.
Other reports Thursday show the economy is improving. The average number of people filing for unemployment benefits over the past month fell to the lowest level since March 2008, the Labor Department said.
And the Commerce Department said new-home sales rose in November at the fastest pace in 21/2 years, further evidence of a sustainable housing recovery.
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