Consumer confidence has biggest drop since 2001

Wednesday, April 30, 2008 at 12:41am

Confidence among Americans fell to a five-year low this month after home prices dropped by the most since at least 2001, signaling a deepening threat to consumer spending.

The Conference Board’s confidence index fell to 62.3 in April, posting its biggest three-month slide since the last recession in 2001, the New York-based research group said Tuesday.

Home prices in 20 U.S. metropolitan areas dropped 12.7 percent in February from a year earlier, more than forecast and the most since S&P/Case-Shiller’s records began seven years ago.

Treasuries rallied and stocks fell after the figures indicated no end in sight to the housing slump. Economists anticipate a report today will show gross domestic product growth slowed to 0.5 percent in the first quarter as home construction fell, employers cut payrolls and consumers struggled with a surge in gasoline prices.

“People sense that hard times are upon them,” said Kevin Logan, senior market economist at Dresdner Kleinwort in New York, who had forecast the confidence gauge would drop to 63. “They feel the pinch from high gasoline prices, their main asset, their home, is declining in value, and jobs are becoming harder to get.”

Declines in home prices have yet to stir buyers. The total number of houses sold in March dropped to a 5.456 million annual pace, the fewest since comparable records began in 1999.

Lenders are trying to devise ways to reduce foreclosures. Bank of America Corp., seeking approval of its Countrywide Financial Corp. takeover, Monday said it will modify at least $40 billion in troubled mortgage loans over the next two years to keep customers in their homes.

“The numbers are certainly consistent with an economy in recession,” Jim O’Sullivan, senior economist at UBS Securities LLC in Stamford, Conn., said in an interview with Bloomberg Television. He said rising gasoline prices and a deteriorating job market hurt confidence this month.

— Bloomberg News

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By: frank brown on 12/31/69 at 6:00

I wonder if the working class in the United States understands what is happening to them? It appears that they think the drop in the value of the dollar and the fact that the upper class is getting richer while they struggle is a temporary condition. Little do they know as usual.

By: Kosh III on 12/31/69 at 6:00

How dare that economist say the "R" word. According to the President it's just a rough patch and everything will be just hunky dory if we stay the course. (sarcasm alert)

By: Blanketnazi2 on 12/31/69 at 6:00

frank, i'm afraid they're too busy watching american idol.