Dec. consumer confidence hung up on 'cliff'

Shoppers flood Manhattan stores such as Macy's for Shoppers flood Manhattan stores such as Macy's for post-Christmas deals. The nation's consumers are worried about the tax hikes and spending cuts that take effect Jan. 1 if Congress fails to avert the "fiscal cliff." (Dec. 26, 2012) Photo Credit: Getty

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U.S. consumers peering over the "fiscal cliff" don't like what they see.

Fears of sharp tax increases and government spending cuts set to take effect next week sent consumer confidence tumbling in December to its lowest level since August.

The Conference Board said Thursday that its consumer confidence index fell for the second straight month in December to 65.1, down from 71.5 in November.

The survey showed consumers' outlook for the next six months deteriorated to its lowest level since 2011 -- a signal to Lynn Franco, the board's director of economic indicators, that consumers are worried about the tax hikes and spending cuts that take effect Jan. 1 if the White House and Congress can't reach a budget deal.

Earlier this week a report showed consumers held back on holiday shopping, another indication of their concerns about possible tax increases.

The December drop in confidence "is obvious confirmation that a sudden and serious deterioration in hopes for the future took place in December -- presumably reflecting concern about imminent fiscal cliff tax increases," said Pierre Ellis, an economist with Decision Economics. The decline in confidence comes at a critical time when the economy is showing signs of improvement in the housing market and the job market in recent months.

But the political wrangling in Washington threatens the economy's slow, steady progress.

A short fall over the cliff won't push the economy into recession. But most economists expect some tax increases to take effect next year. That could slow economic growth.

While consumers are more worried about where the economy is headed, they were upbeat about present conditions, according to the latest survey. Their assessment of current economic conditions rose this month to the highest level since August 2008.

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