March 26, 2008 | posted by Michael Baxter in US economy |

It was all woe again in the US yesterday.

This time it was two closely-watched indices that caused the fans to clog up.    The two indices were not just bad either, they were downright awful.

First there was the US Consumer Confidence Index produced by the Conference Board.  Now this index stayed high throughout last year, and in fact last July the index hit its highest level in years.  It was the strength of this index that partially led many forecasters to predict only a mild slowdown in the US, with many saying things like, “The US consumer continues to defy the gloom.”

That all changed last month when the index fell off the edge of a cliff.  In July last year the index stood at 111.9, last month it fell to just 75, the  lowest level in five years. But then yesterday the data for March was out, and things are even worse, the index fell to 64.5.   The index was marginally lower than that in march 2003 – but only for one month, and that was when the US invaded Iraq.  That rather ‘blippy’ month aside, the last time the index was so low was in the early 1990s.

But the Conference Board also produces a forward-looking expectations index –and this fell to 47.9, the lowest level in, wait for it, this is a big number, the lowest level in 34 years. The last time consumers’ forward expectations were so low the Oil Embargo and Watergate were making the headlines.

If that wasn’t bad enough, inflation expectations calculated by the Conference Board also rose, hitting 6.1 per cent. 

So, that leaves us with a bit of a problem.  Expectations are at  their lowest level since the mid 1970s; how do we top that?

Well, that’s easy, because if you now turn to the US housing market, and look at the latest Case-Shiller report from Standard and Poor’s, out yesterday,  its index that tracks house prices in the top 20 cities in the US fell by 10.7 per cent, the biggest fall ever recorded.

The index is now 12.5 per cent down from peak, recorded in July last year.

“Unfortunately it does not look like early 2008 is marking any turnaround in the housing market, after the declining year recorded throughout 2007,” said David M. Blitzer, Chairman of the Index Committee at Standard Poor’s.

Capital Economics said, “The bottom line is that regardless of the measure used, house prices are now falling and the rate of decline is accelerating.”