Consumer Confidence Plunges

Consumer confidence in the U.S. economy and their own financial well-being in May fell to its lowest level since June 1980, according to the Reuters/University of Michigan Surveys of Consumers, released today. The May Index of Consumer Sentiment score was 59.8, falling from 62.6 in April and from 88.3 in May 2007. The June 1980 score was 58.7. Consumer purchasing power has been diminished by smaller income gains, fewer jobs, higher prices of necessities, falling home prices, tighter credit standards and record levels of outstanding debt, Richard Curtin, director of the surveys, said in a statement. "For consumers to increase their savings as well as cope with the higher costs of food and fuel will require a prolonged shift in budgets away from discretionary spending," he said. The Reuters survey suggests that consumers' purchasing plans for vehicles and household durables-furniture, appliances and home electronics-were the least favorable since the early 1980s. The U.S. Bureau of Economic Analysis today reported that real personal consumption expenditures increased 0.70% in the first quarter, compared with first-quarter 2007's increase of 2.56%. This metric is expected to be at or below 1% for the rest of the year, Curtin said. Nine in 10 consumers surveyed by Reuters thought the economy was in recession during May. Gross domestic product grew at a seasonally adjusted annual rate of 0.9% in the first quarter, an improvement from an earlier estimate of 0.6%, the bureau reports. First-quarter 2007 GDP growth was 0.6%, followed by 2.8%, 4.9% and 0.6% in the second, third and fourth quarters, respectively.