US Consumer Confidence Falls to 2011 Lows

Why?

Confidence among U.S. consumers declined more than forecast in January, reaching the lowest level in more than a year as higher payroll taxes took a bigger bite out of Americans’ paychecks.

The Conference Board’s index decreased to 58.6, the weakest since November 2011, from a revised 66.7 in December, figures from the New York-based private research group showed today. The January reading was lower than the most pessimistic forecast in a Bloomberg survey, which had a median estimate of 64.

The drop in confidence coincides with a two percentage- point increase in the payroll tax used to fund Social Security, a hurdle for consumers after a projected pickup in spending in the fourth quarter. The outlook for employment prospects and incomes also deteriorated this month, today’s data showed.

via Consumer Confidence in U.S. Falls to Lowest Level Since 2011 – Bloomberg.

What does it mean? What does it bode?

Well, the fiscal doves would say that hitting the middle and lower classes with increased taxes during a very weak and slow recovery is just not sound economics. Those who can least afford to pay, end up paying more. Social Security was no where near bankruptcy, and more of the tax revenue could have been aimed at causing the longest-term solvency projections for Social Security than at reduced tax increases on those who take the lion’s share of the worker’s efforts already.

The fiscal and monetary hawks would say that those taking the lion’s share are not taking more than their fair share but are forming the capital and taking the biggest risks to employ the mass of the workers.

We aren’t going to end that debate here, but what we will say is that the worse it is for consumers in general, the more they will stay in rental housing.

Of course, there comes a point at which the economy can be doing so poorly that even renting becomes unaffordable even for the cheapest properties.

In that case, perhaps this saying might be wise to heed: What’s the point in gaining the whole world if the bottom is going to fall out on you as a result of the process you used to gain it?

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