It's not news that uncertainty and fear are running high at the moment, but it's a bit surprising just how down-in-the-mouth everybody is in the latest confidence surveys. The Conference Board's Consumer Confidence Index plunged to 25 in February, down from 37.4 in January and way below the slight dip to 35.5 expected by economists. The reading set another all-time low.
High Frequency Economics called the drop in confidence "breathtaking," and hints that the turmoil in stocks (three straight days down more than 1 percent before today's rise) is swamping factors like lower gasoline prices. HFE also says the dismal expectations index, if maintained at its February level, "is consistent with real consumers' spending falling by about 5% y/y. In Dec it was down 1.7% so there is still some way to go, unfortunately."
Action Economics says: The index remains far below prior cycle lows of 47.3 in February of 1992 and 50.1 in May of 1980, hence leaving a grim reminder of just how focused the public is on the "crisis environment" in this cycle, despite the confidence bounce we might have ordinarily seen from both a sharp drop in food and energy prices through December and the massive "stimulus" plan aimed at shoring up confidence.
Plus, it's not like Fed Chairman Ben Bernanke is helping out any. The central bank chief was the latest official (looking your way Mr. Geithner) to give a speech short on detail but long on worry. Some highlights:
“The measures taken by the Federal Reserve, other U.S. government entities, and foreign governments since September have helped to restore a degree of stability to some financial markets,” he said in his prepared testimony. “Nevertheless, despite these favorable developments, significant stresses persist in many markets.”
It's important to stop here and remember that there has been progress (which Bernanke also pointed out). Mortgage rates and credit conditions that were larger threats earlier in this crisis have improved. Bernanke predicted 2010 "will be a year of recovery" if government actions work. The downside? It's not yet clear that they are. Most securitization markets "remain shut" and "some financial institutions remain under pressure," he said.
The bottom line is money is still not flowing. It is barely trickling. No wonder everbody's so depressed...