"The increase in the payroll tax has undoubtedly dampened consumers' spirits and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock"
- Lynn Franco from the Conference Board
Confidence among U.S. consumers declined more than initially was expected this month, reaching the lowest level in more than a year, as Americans were more pessimistic about the economic outlook and their financial prospects. According to the Conference Board, a gauge of consumer confidence fell to 58.6, the weakest since November 2011, from a revised 66.7 in December, and below analysts' expectations of a reading of 64.8. Even though U.S. politicians came to an agreement that averted the so-called "fiscal cliff", the deal did raise taxes for many Americans and a number of budget issues still remain unresolved, which weighed on the consumers' mood.
"The increase in the payroll tax has undoubtedly dampened consumers' spirits and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock," Lynn Franco, director of economic indicators at The Conference Board, said in a statement.
"The thing that's particularly troubling is the sizable decline in expectations," said Guy Lebas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, who projected a reading of 61.6. "As those expectations deteriorate, it doesn't bode particularly well for day-to-day consumer spending."
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