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US: Consumer confidence crashes in October

Wed, Oct 29 2008, 08:39 GMT
by KBC Market Research Desk

KBC Bank

Consumer confidence plunged from an upwardly revised 61.4 to 38.0 in October, while the consensus was looking for an outcome of 52.0. Both sub-indices declined sharply with the present situation falling from 61.1 to 41.9 and expectations dropping from 61.5 to 35.5. Consumers were especially more pessimistic about the labour market and business conditions. Consumer confidence reached now its lowest level since series began in 1985 which clearly illustrates that the financial crisis has a big impact on consumer sentiment.

The Richmond Fed manufacturing index plunged to its lowest level since series began in 1993. The headline figure worsened more than expected, coming out at -26 in October (from -18). Details show that all sub-indices worsened led by sharp declines in new orders (-35 from -23), shipments (-24 from -16), order backlog (-40 from -24), capacity utilization (-27 from -15) and average workweek (-14 from -2). The number of employees fell from -13 to -15 and wages dropped from -2 to -4. Looking at prices, prices paid declined from 3.85 to 3.66, while prices received were higher (2.06 from 1.68). After the NY and Philly Fed, the Richmond Fed is the third regional survey showing a sharp deterioration in business confidence, which raises fears that manufacturing ISM will also worsen significantly.

The S&P Case Shiller house price index came out in line with the expectations, falling 16.62% Y/Y in August. The July figure was upwardly revised from -16.35% Y/Y to -16.32% Y/Y. The three months annualized figure deteriorated from -8.43% to -9.25%, but is clearly below the low of -24.9%, reached in March. Although the bottom is not yet in sight, it is important to note that the pace of the decline slows further which indicates that signs of stabilization may not be too far away.

Other: CBI reports unchanged volume of sales

In the UK, the CBI distributive trades (retail) survey reported an unchanged sales balance of -27 in October. The less volatile three months average improved from -36 to -33, but remains very weak. Although the CBI reported an improvement in sales in recent months, there are no reasons to become more optimistic about the UK economy.

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Published on  Wed, Oct 29 2008, 10:32 GMT