It’s been 14 months since consumer confidence has been so low. That’s not the kind of news anyone likes to hear the first month into a new year, but it evidently stems from a development that could only have come this month – paychecks reflecting the expiration of the two-year temporary cut in social security taxes. Americans are bringing home less pay these days, thus the logical conclusion that they have less to spend.
January’s consumer confidence fell 8.1 points, the third decline in three straight months. It comes on the heels of Congress’ deal reached in January that enabled us to avoid the fiscal cliff, but did not extend a cut in social security taxes that had been putting an extra $1,000 into the pockets of U.S. households earning $50,000 a year.
Of course, social security taxes aren’t the only thing that have U.S. consumers concerned.
Though we technically avoided falling off the fiscal cliff this month, there are plenty of fiscal issues to be dealt with, including spending cuts and the federal borrowing limit. Unemployment is also still holding steady at 7.8 percent and the job market remains sluggish, with Americans doubting their job prospects looking forward into the next six months.
All of that said, Congress is expected to pass No Budget, No Pay this week. In addition to the no pay incentive for passing a budget, the bill should raise the federal borrowing limit enough to get us through May 2013. We’ve also seen positive developments in housing in recent weeks and months. As a I blogged a couple of weeks back: “Analysts predict that in 2013 residential housing will positively contribute to the economy for the first since 2005.”
Bottom line, your best bet is to follow the best advice in any economic climate. Even if you’re the most confident of consumers, you are always best served when mindful of saving more and spending less.