“CCI, which had increased moderately in November, declined to a new all-time low in December. The Index now stands at 38.0 (1985=100), down from 44.7 in November. The Present Situation Index plummeted to 29.4 from 42.3 last month. The Expectations Index decreased to 43.8 from 46.2 in November.”
“Those claiming business conditions are "bad" increased to 46.0% from 40.6%, while those claiming business conditions are "good" declined to 7.7% from 10.1% last month.”
This suggests that pessimism is taking a stronger hold amongst those who were previously either neutral or optimistic – a sign that this downturn is now being felt not only at the lower margin of earnings distribution, but also at the core middle and upper-middle classes.
Exactly the same dynamic – falling numbers of previously optimistic respondents, along with ‘marginal’ respondents – was evident in the assessment of the labor market:
“Consumers' assessment of the labor market was also considerably more negative than a month ago. Those saying jobs are "hard to get" rose to 42.0% from 37.1% in November, while those claiming jobs are "plentiful" decreased to 6.2% from 8.7%.”
Probably the worst piece of today's news relates to the future expectations. In a marked departure from the current conditions trend short-term expectations have shown greater polarization of US consumers away from the center, with marginal respondents migrating toward either greater optimism, or pessimism.
“Those anticipating business conditions to worsen over the next six months increased to 32.8% from 28.3%, while those expecting conditions to improve rose to 13.4% from 11.5%. The outlook for the labor market was also somewhat mixed. The percentage of consumers anticipating fewer jobs in the months ahead increased to 41.0% from 33.7%, while those expecting more jobs increased to 9.7% from 9.2%. The proportion of consumers anticipating an increase in their incomes decreased to 12.7% from 13.1%.”
Lessons for Ireland
In light of the US data, over the next two-three months we should expect:
- Further deterioration in consumer confidence here, as to date, both the comparative dynamics of the Irish time-series and the underlying fundamentals for CCI in Ireland have been closely following those in the US;
- Deeper declines in expectations component in Ireland than in the US, as underlying 'misery index' fundamentals for Ireland are showing much more negative future dynamics for Q1-Q2 2009;
- Significantly stronger shift of previously marginal and optimistic consumers toward deeper pessimism (with respect to both their perceptions of current conditions and future expectations) as Irish downturn starts to feed through to the middle and upper-middle classes at an accelerating rate starting with January.