Consumer spirits, which tumbled in October and November to recession lows, did not worsen in December, according to the latest survey of consumer confidence by the Conference Board.
"We've leveled off," says Fabian Linden, executive director of the Conference Board's Consumer Research Center. "The bad news is that we're still a very disenchanted population."
The Conference Board's index of consumer confidence, based on a monthly survey of 5,000 households around the nation, stood at 52.4 in December, compared with 52.7 in November. But the dip of three-tenths of a percentage point does not signify a true change, Linden said yesterday, because any movement in the index of less than a full point reflects "normal static in the data."
The survey results echo an earlier report on consumer confidence from the University of Michigan, but both reports reflect mostly the mood of consumers before they heard two significant -- and offsetting -- pieces of economic news: the sweeping job cuts announced Dec. 18 by General Motors Corp. and the Federal Reserve's reduction in the discount rate on Dec. 20.
The results were based on responses from the first 18 or so days of December, and thus do not measure attitudes during the last days of the month. So it is quite possible that the Conference Board's index for December will be revised next month, although it is unclear whether GM's cuts or the Fed's move will hold greater sway with those surveyed.
Consumers were more downbeat in December than in November about current economic conditions, especially job prospects, and less inclined to make major purchases like cars or appliances. But at the same time they were more hopeful than a month earlier that the economy would be in better shape six months from now.
One important barometer of the mood of consumers, existing home sales, rose in November, the National Association of Realtors said yesterday. Home resales jumped 5.4 percent, the biggest rise in 9 months, after climbing 1 percent in October. Home buyers, especially in the South and Midwest, are able to take advantage of the lowest mortgage rates in 14 years.
Nonetheless, the December confidence reading from the Conference Board shows that consumers are as depressed now as they have been at any time in the last couple of decades, including the depths of the 1981-82 recession, when unemployment was in the double digits. The jobless rate last month was 6.8 percent.
A fading sense of job security, even at the cream of corporations and in top-paying white-collar professions, is to blame, economists say.
"The problem is much more pervasive than people actually losing jobs," says Neal Soss, the chief economist of First Boston, who sees the entire postwar economic structure being dismantled just as surely as the ending of the cold war.
"Corporations can't be viewed as loyal," he says. "Workers can't have as much confidence in the future."
And consumers' spirits are unlikely to revive for some months, he adds. "Until companies fix up their balance sheets, employers can't restore a sense of security," Soss says. But the Federal Reserve's recent action should help eventually, because "declines in interest rates are the needed therapy because they let companies fix up their balance sheets."
What does the gloomy mood imply for spending in the year's final quarter?
"Consumer spending figures don't follow the confidence numbers," says Edward McKelvey, an economist at Goldman, Sachs & Co. Partly, he says, that is because consumers devote half of their budgets to services such as utilities and medical care.
McKelvey says he thinks spending in the fourth quarter stayed roughly even with that of the third quarter. "The spending figures are not behaving the way you'd expect them to," he says, noting that the collapse in confidence indicated in the October and November surveys had not translated into lower expenditures.