U.S. consumer confidence fell more than expected in January, reaching the lowest level in more than a year as higher payroll taxes took a bigger bite of Americans' paychecks.
Bloomberg reported that the Conference Board’s Consumer Confidence Index decreased to 58.6, the weakest since November 2011, from a revised 66.7 in December, figures from the New York-based private research group showed today. The January reading was lower than the most pessimistic forecast in a Bloomberg survey, which had a median estimate of 64.
The drop in confidence coincides with a two-percentage-point increase in the payroll tax used to fund Social Security, a hurdle for consumers after a projected pickup in spending in the fourth quarter. The outlook for employment prospects and incomes also deteriorated this month, today’s data showed.
“The uncertainty and bickering is weighing it down,” Richard F. Moody, chief economist at Regions Financial Corp. in Birmingham, Ala., said before the report. “I’m convinced that a lot of people didn’t realize that their taxes were going up in January. These higher payroll taxes, they’re going to put that much of a dent in disposable income.”
The 8.1-point slump in the gauge of sentiment from a month earlier was the biggest since August 2011. Estimates of the 73 economists surveyed by Bloomberg ranged from 59 to 70. The measure averaged 53.7 during the recession that ended in June 2009.