Confidence ebbs, raises question: Will shoppers act more like Santas or Grinches?

Friday, December 8th 2006, 6:11 am
By: News On 6

WASHINGTON (AP) _ Consumer confidence dipped in December, suggesting Americans are feeling less cheery _ but are not downright gloomy _ as they hit the malls during the holiday season.

The RBC Cash Index, based on the results of the international polling firm Ipsos, showed that confidence came in at 86.9. That was down from 92.4 in November and was the lowest reading since October.

Shoppers' spirits can affect just how much they are willing to keep cash registers ringing during the crucial holiday sales period for retailers.

Consumer spending accounts for roughly two-thirds of all economic activity. Economists keep close tabs on confidence readings for clues about consumers' appetite to spend.

Economists believed the slip in confidence was linked to the fact that energy prices, which had been falling, are now creeping up. Gasoline, selling at $2.25 a gallon at the end of November, is now hovering around $2.30. Surging energy prices this year caused some consumers to tighten the belt.

People also are nervous about how much the value of their home will be hurt by the housing slump, a development that would affect how wealthy people feel and their willingness to spend, economists said.

Also making people feel a bit uneasy is the extent to which the economy, which has been losing speed all year, will slow.

All those things are ``resonating and making them feel a little queasy,'' said economist Ken Mayland, president of ClearView Economics.

Consumers, however, are not feeling overly glum. Even with December's dip, consumer confidence is running a bit better than the reading of 85.5 logged for the same month last year.

The confidence index is benchmarked to a reading of 100 on January 2002, when Ipsos started the survey.

The slide in confidence comes as Americans' gave President Bush lower marks for his economic stewardship. The president's approval rating on the economy fell to 38 percent in December from 43 percent in November, according to a separate AP-Ipsos poll.

Most of the ebbing in consumer confidence in December reflected concerns about economic conditions over the next six months. This ``expectations'' index sank to 55 from 60.5 in November. This measure, which turned negative last fall when surging energy prices and other fallout from the deadly Gulf Coast hurricanes shook Americans, has been weak for much of this year.

Consumers' feelings about current economic conditions slipped to 95.2, from 102.9 in November.

Economic growth slowed to a 2.2 percent pace in the third quarter, held back by the housing slump. Growth in the October-to-December quarter as well as into early next year also is expected to be lethargic.

Another index that tracks peoples' attitudes about buying, saving and other investment decisions dropped to 82.5 in December, down from 92.1 in November.

``I think the negative housing story is weighing on peoples' minds. I think they feel a little less positive on that front,'' said Bill Cheney, chief economist at John Hancock Financial Services.

Owners this year are seeing their homes either drop in value or not go up by nearly as much as they had during the housing boom. Home sales have also fallen off this year, after hitting record highs for five years running. Fewer homes sold can mean less demand for new furniture, appliances and other household goods, analysts said.

A gauge tracking peoples' feelings about the job market, meanwhile, rose to 126.5 in December, compared with 121.3 in November.

The RBC consumer confidence index was based on responses from 1,000 adults surveyed Monday through Wednesday about their attitudes on personal finance and the economy. Results of the survey had a margin of error of plus or minus 3 percentage points.