Conference Board Report Rekindles Recession Fears : Consumer Confidence Off Sharply

Consumer confidence fell dramatically and unexpectedly in December, rekindling fears that the economy is headed for trouble in the months ahead, the Conference Board reported Tuesday.

The Conference Board, a New York-based business research group whose monthly consumer surveys have a wide following, said its confidence index reached a new low for 1984, falling more than 11 points to 85.6 in December from November levels.

In addition, a separate buying plans index also fell sharply, dropping to 95.9 in December from 102.7 in November.

The drop in the confidence index was the biggest in more than four years and was so surprising that the Conference Board sent the results through the computer twice to ensure their accuracy. The drop followed a sharp rise in November.

“The December figures were as big a surprise to us as they were to anyone,” said Fabian Linden, executive director of the board’s consumer research center.

The report seems to provide additional evidence for the view that the economy is headed into a recession. But it also raises questions about whether these kinds of surveys are most useful as leading or lagging indicators of economic events.

Two other consumer surveys also indicate that consumer confidence fell in December, but some economists argued that these indexes reflect the consumer uncertainty that resulted from the economic slowdown of the last six months of 1984.

“I don’t think (the Conference Board’s report) suggests a near-term recession or a slowdown in spending,” said Allen Sinai, chief economist for Shearson Lehman/American Express in New York. The outlook for consumers is actually excellent because interest rates are falling, Sinai said.

The Conference Board, however, said its consumer confidence survey has always been an accurate barometer of future events. “I have never seen a one-month drop like this without something (bad) happening later on,” Linden said.

The December survey, which represents the results of questions sent to 5,000 households nationwide, shows that consumers are bearish about business conditions, job prospects, personal income and future buying plans. For example, 26.6% of those surveyed said that they thought their personal income would increase in the next six months, down from 30.9% in November. Only 8% said they would be buying cars in the next six months, down from 8.5% in November.

For example, 26.6% of those surveyed said that they thought their personal income would increase in the next six months, downfrom 30.9% in November. Only 8% said they would be buying cars in the next six months.

An even more pessimistic view come from a research firm in Media, Pa., owned by Al Sindlinger, who said consumer confidence has been been dropping since late May.

The country is actually entering a rare kind of economic slowdown known as a “deflation recession,” said Sindlinger, meaning a slowdown that results in a post-inflation era as consumers stop buying merely as a way to head off expected future price hikes.

Another widely followed survey, put out by the University of Michigan, also indicates that consumer confidence fell in December but not enough to be “statistically significant,” survey director Richard T. Curtin said.