Tuesday, February 23, 2010

Consumer Confidence Plunges As Reality Sets In

Consumer confidence nosedived to a 10-month low in February, according to the Conference Board.

The index, which stood at 56.5 in January, plunged to 46. The economy is considered stable only when the reading surpasses 90.

By this measure, our economy is halfway to stable.

Consumers are clearly worried about their jobs or, for the unemployed, their prospects of finding jobs. They are worried about mortgage payments, or delinquencies and defaults. They are worried about credit card debt, medical debt, and every other manner of debt.

Their anxiety will likely lead to curbed spending, the board said.

That's a problem for the economy since about 70% of economic activity is derived from consumer spending. This lack of consumer confidence dampens hopes of a nascent recovery.

People are simply reacting to what they feel, to what they hear, and to what they see around them. They see empty storefronts and foreclosure signs everywhere. If they haven't lost their jobs, they know people who have.

People aren't buying any of this "greenshoots" nonsense. They obviously dismiss the government's and media's claims of an economic recovery.

Americans are opting for realism over baseless optimism. Reality is setting in. Our current situation is more than jut an economic cycle.

Everything has changed, and may never be the same.

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