Consumer Confidence Hits 16-Year Low

Warren Buffett notwithstanding, recent reports that the U.S. economy is averting an outright recession appeared to be doing little to buoy consumer confidence. Filling up the gas tank could be one reason.

The Conference Board yesterday said that its Consumer Confidence Index dropped to 57.2, down from 62.8 in April, marking a fifth consecutive month of decline and the lowest number since October 1992 when the economy was edging out of recession.

The declining number gave economists little to cheer about. News reports noted that the so-called sentiment readings of consumers are closely watched since spending accounts for two thirds of the country’s economic activity.

“Weakening business and job conditions coupled with growing pessimism about the short-term future have further depleted consumers’ confidence in the overall state of the economy,” Lynn Franco, director of the Conference Board’s Consumer Research Center, said in a statement.

Consumers concerns about inflation, due to rising gas prices, are now at an “all-time high” and are likely to rise in the months ahead. She added that based on consumers’ outlook on the economy, she believes there’s little likelihood of a quick turnaround.

Mark Vitner, senior economist with Wachovia Corp., agreed, saying that he doesn’t believe that confidence has bottomed out yet, an ominous sign for consumer spending.

“Higher gasoline is of immediate concern,” Vitner said. “ A lot of the extra money is going toward gas and food.” And he doesn’t see consumer sentiment improving until gas prices start receding.

The Consumer Confidence report, derived from responses received through May 20 of a representative sample of 5,000 American. households, has a margin of error of plus or minus 2.5 percentage points.