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Credit Consumer Concerns
In addition to credit woes, consumers have concerns about the economy as well.
Consumer confidence is now at the lowest point since Hurricane Katrina. Consumers are worried over business conditions and job prospects, and now there's the mortgage situation, which is experiencing the biggest fall in home prices in more than 15 years.
The reports illustrate some of the challenges facing the Federal Reserve, which is expected to cut short term interest rates for the second time in two months. The policymaking Federal Open Market Committee sliced a key interest rate by a half-percentage point to 4.75% in mid-September, faced with turbulent conditions in credit markets and a worsening housing slump. Since the Fed move, credit markets have improved but are still unsettled. The housing market has continued to slide, leading to concerns that falling home prices and construction could pull down the broader economy.
A fifth of the consumers surveyed believe there will be fewer jobs in the next six months, and slightly more Americans expect their income to decrease compared with a year ago. The share of consumers who believe employment is plentiful dropped below 25% for the first time since August 2006.
“Home prices declining at an accelerating rate, that’s not exactly anything new at this stage,” said Joshua Shapiro, chief United States economist at the research firm MFR. But Mr. Shapiro said the confidence report suggested employment levels could be dipping, and he said he expected a weaker payroll report for October.
Investors are still confident that the Fed will cut interest rates when it announces its policy decision tomorrow. A cut would make it easier for banks and businesses to borrow money, which would ease investors’ concerns about a tight credit market.
But there is a chance the Fed will decide hold rates steady. Broader economic measures, like promising jobs and sales reports, have revealed some strength in the overall economy, though the housing sector continues to stumble and the dollar is at an all-time low against the euro.
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