Consumer Confidence: December 2002

The Conference Board's composite Consumer Confidence Index ended 2002 on a sour note, falling to a point 15.1% lower than in December 2001. After declining by a cumulative 28% from May to October of last year, the CCI rose by 6.7% in November but gave almost all of that gain back over the course of December.

With a December 2002 reading of 80.3 on the Conference Board's scale, on which average confidence during the year 1985 is equal to an index level of 100, the most recent composite CCI was 5.4% lower than during November.

The Present Situation subindex of the CCI fell by 10.7% from November to December 2002 and ended the year 28.5% below the December 2001 index level. The Expectations (defined as six months into the future) component of the CCI, however, continues to paint a less bleak picture and suggests that Americans continue to believe that the worst of this downturn will soon be behind us. The Expectations subindex declined by 2.4% from November to December and was 5.6% lower at the end of 2002 than it was during December 2001.

Confidence indexes for all nine regions of the nation recorded decreases during December of last year. Double-digit over-the-month losses were recorded in the New England (-24.5%), West North Central (-17.9%) and East North Central (-15.6%) regions. The smallest November-to-December drops were registered in the South Atlantic (-4.9%) and East South Central (-5.4%) states. The CCI for every region except the East South Central ended 2002 at a lower level than a year earlier.

And the part of the Conference Board's survey that measures actual buying plans (over the upcoming six months) of American households showed some deterioration during December as well. It's clear that the relative scarcity of new jobs and concerns about the nation's likely military action to disarm Iraq weigh heavily upon the minds and wallets of American consumers as we enter the new year.

During December 2002, 28.1% of households surveyed said they planned to buy at least one major appliance during the upcoming six months. As recently as August, this figure stood at 31.3%. Similarly, home buying plans dropped from a 4.5% share of households in August to 3.1% during the final quarter of 2002. And auto purchase intentions dipped to 7% during the final three months of last year after peaking at 8.3% in July.