Consumer confidence dropped sharply to a 14-year low this week, extending a month-long decline similar to those seen at the start of the 1990-91 and 2001 recessions.
The ABC News Consumer Comfort Index stands at -33 on its scale of +100 to -100, down 6 points in the past week and 13 points in the past month. That's an unsettling sign: The index fell by 13 points in four weeks just in advance of the 1990-91 recession and by 14 points in four weeks leading up to the 2001 recession.
A decline of this week's magnitude, moreover, is rare: The CCI has lost 6 or more points in a single week on just 11 occasions in 22 years of weekly surveys. This week's fall occurred mainly in the West, where confidence had been higher than in other regions.
In a separate ABC News/Washington Post poll this week, 59 percent said they think the economy's already in a recession and two-thirds expressed doubt that a government stimulus package would do much to soften the blow. Mentions of the economy as the single most important issue in the 2008 election have more than tripled since September.
Falling consumer confidence goes hand-in-hand with a range of other negative economic news – the continued housing and credit crunches, slower-than-expected growth in GDP in the last quarter of 2007, the Dow's worst January in eight years and a report from the Bureau of Labor Statistics that employers cut jobs in January for the first time since 2003.
INDEX – ABC's consumer index is based on Americans' ratings of their current finances, the national economy and the buying climate. This week positive ratings of the buying climate are their lowest since 1993, as is the index overall; and views of the national economy are their lowest since 2003.
Just 22 percent now rate the economy positively, down 5 points from last week and down 8 points in two weeks to the fewest since March 2003, and well below the long-term average of 40 percent. Positive ratings of the economy have dropped by 5 points or more in a single week only eight times in the index's history – four of them in the past year.
Positive ratings of the buying climate, at 26 percent, are their lowest since July 1993 – down 5 points in the past month and 12 points below their long-term average. And while more, 52 percent, rate their own finances positively, that's down by 6 points in the last month and below the long-term average of 57 percent.
TREND – As noted, the CCI, at -33, is its lowest November 1993, and has dropped 13 points in the last four weeks, a slope similar to the start of the last two recessions. It dropped from +19 to +5 from February to March 2001, and from -14 to -27 in June to July 1990.
This year has seen a continuation of the CCI's downward trend of 2007, when it averaged -2 in the first quarter, -9 in the second, -12 in the third and -18 in the fourth. Five weeks into 2008, the index's average for the year so far is -25, well below its 2007 average, -11, and its 22-year average of -10.
While far below its record high, +38 in January 2000, the index also is better than its record low, -50 in February 1992.
GROUPS – As usual the CCI is higher in better-off groups. It's +9 among higher-income people while -58 among those with the lowest incomes, -18 among those who've been to college while -53 among high-school dropouts, -31 among whites but -40 among blacks and -23 among men while -43 among women.
Partisan differences remain: The index is -5 among Republicans, but -38 among independents and -49 among Democrats.
Here's a closer look at the three components of the ABC News CCI:
NATIONAL ECONOMY – Twenty-two percent of Americans rate the economy as excellent or good; it was 27 percent last week. The highest was 80 percent on Jan. 16, 2000. The lowest was 7 percent in late 1991 and early 1992.
PERSONAL FINANCES – Fifty-two percent say their own finances are excellent or good; it was 54 percent last week. The best was 70 percent last reached in January 2000. The worst was 42 percent on March 14, 1993.
BUYING CLIMATE – Twenty-six percent say it's an excellent or good time to buy things; it was 28 percent last week. The best was 57 percent on Jan. 16, 2000. The worst was 20 percent in fall 1990.
METHODOLOGY – Interviews for the ABC News Consumer Comfort Index are reported in a four-week rolling average. This week's results are based on telephone interviews among a random national sample of 1,000 adults in the four weeks ending Feb. 3, 2008. The results have a three-point error margin. Field work by ICR-International Communications Research of Media, Pa.
The index is derived by subtracting the negative response to each index question from the positive response to that question. The three resulting numbers are added and divided by three. The index can range from +100 (everyone positive on all three measures) to -100 (all negative on all three measures). The survey began in December 1985.