Consumer confidence fell to a seven-month low in June on continuing worries about high unemployment and stagnating wages, following a string of bad news that threatens the painfully slow U.S. economic recovery.
The Conference Board's Consumer Confidence Index slipped to 58.5 in June, down from a revised 61.7 in May, the private research group reported Tuesday.
"Americans still feel like they're in a recession," said C. Britt Beemer, chairman of America's Research Group. "They feel like they're driving in a car and getting hit by all sides."
A reading of 90 indicates a healthy economy on the index, which measures how Americans feel about business conditions, the job market and the next six months. But it hasn't approached that level since the recession began in December 2007. In fact, two years after the recession officially ended in June 2009, consumer confidence is still fragile.
"Consumers are growing increasingly worried about the near-term economic outlook," says Mark Vitner, senior economist at Wells Fargo.
Jim Horseman, 55, a railroad engineer from Avon, Ohio, is among those consumers who remain queasy about the economy. He said he needs to buy a new car but is putting it off until next year.
"I'm not giving up my money. I'm holding on to my savings," Horseman says. "I feel much safer with my money in the bank making no interest than not having it."
Isaac Burrows, 24, who works on commission as a salesman at a Clarke's Shoe's store in downtown Indianapolis, is also concerned. He said he sees troubling signs of the economy at his job. A few years ago, he could sell $10,000 worth of shoes a week; now he's lucky if he can sell half that.
"There haven't been any real signs that would give you that confidence," Burrows says.
Still, economists had expected the confidence index to edge up because consumers are paying less at the pump. But that didn't seem to boost shoppers' mood.
Consumers had been hurt by rising gas prices that neared $4 per gallon ($1.05 a liter) in late April and early May, leading many to cut back on spending for everything from televisions to clothes. But since late May, gas prices have fallen to a national average of $3.57 per gallon.
Lynn Franco, director of The Conference Board Consumer Research Center, said rising gas prices have much more of an impact on confidence as they go up than when they fall. Besides, the fact that there is less pain at the pump comes as there is a steady drumbeat of other economic news that ranges from mildly encouraging to downright bad.
The consumer confidence report was issued on the same day a widely watched Standard & Poors/Case-Shiller index reported that spring buying boosted home prices in 13 U.S. cities. But the report also showed that housing remains weak in most of the country. Economists say homeowners are mostly unwilling to sell their homes given the widespread declines in home values. And nearly 2 million foreclosures have hit the market over the past two years.
Meanwhile, shoppers are getting paltry wage increases at the same time that they are paying more for food and clothes. The government reported on Monday that incomes rose 0.3 percent for the second straight month. But adjusted for inflation, after-tax incomes increased only 0.1 percent in May, after falling by the same amount in the previous month.
This fall, shoppers will be seeing the cost of most clothing and accessories go up as retailers grapple with higher labor costs in China and soaring prices of raw materials like cotton. Stores had started to raise prices this spring but only on select items.
Americans are most worried about the dismal job market. Hiring has slowed this spring after a strong start at the beginning of the year. The unemployment rate inched up to 9.1 percent last month from 9.0 percent in April.
Economists say the Conference Board's index accurately reflects consumers' moods and spending habits when studied over a few months, instead of one month at a time. The June survey echoes the deteriorating confidence tracked by The Gallup Poll, which reported that Americans' economic confidence receded in early June and remains near its 2011 low.
The Conference Board survey, conducted by The Nielsen Co., is based on a random survey mailed to approximately 3,000 households from June 1 through June 16. Survey's numbers are updated after the month ends.