The tepid economic recovery took a hit Tuesday when the Conference Board's consumer confidence index dropped to its lowest level in 14 months.
The economic think tank's index gauges Americans' mood on everything from income to future spending, and right now the nation doesn't feel like taking any money out of their pockets. The index's January reading of 58.6 was down from 66.7 in December and was its lowest level since November 2011.
The survey was taken in early January shortly after many Americans collected their first paychecks of the year and noticed less take home pay. That's because the payroll tax, what we paid into Social Security, expired Jan. 1 and government leaders did not extend the credit during the fiscal cliff negotiations.
It's estimated for individuals earning around $50,000 annually, the loss of the tax credit means about $1,000 less in take home pay. While that does not sound like much spread across a year, roughly $83 per month, it is less money to cover daily expenses including gasoline, groceries or an evening out.
Late last week, the Conference Board also released its outlook on future economic activity. That index of indicators rose 0.5 percent in December, which suggests economic growth should strengthen in 2013.
Kevin McGee, a professor of economics at the University of Wisconsin-Oshkosh, said there is reason to feel good about where the economy is heading, but things still could be better.
"We seem to be out of the woods at least in terms of another big economic downturn," he said.
Most experts agree the global economy overall will grow at rates ranging between 2.2 percent and 3.9 percent. The Conference Board expects the U.S. economy to grow at an annual rate of between 2.1 percent and 2.5 percent in 2013, which is in range of other economists' projections.
The economic downturn in Europe hasn't created too much of a drag on the U.S. recovery, McGee said. And with the nation kept from falling off the fiscal cliff there appeared to be no threat to the recovery.
"With that said, there also seems to be no sign of any impending growth spurt," McGee said.
Domestic auto sales hit a five-year high in 2012, closing the year with 14.5 million new vehicles sold. Industry estimates show sales could hit 15.5 million in 2013, which is close to normal historic annual sales volume.
The housing market appears to be on the mend. The Wisconsin Realtors Association reported 2012 statewide sales of existing homes finished 20.7 percent higher when compared with 2011.
Sales of existing homes around the state have shown improvement the past 18 months. WRA projects sales growth will continue in 2013, but monthly increases may not be as dramatic as 2012, possibly ranging between 8 percent and 10 percent, which still are good growth numbers, the association said.
McGee said consumer spending still is the primary driver behind the nation's economy. Wage growth has been weak and with Americans taking home less money, it could affect future spending.
"Although the housing market is nearly back to normal, there are still a lot of households whose mortgages exceed their home's value," McGee said. "And there are a lot of households who have learned that easy credit is a double-edged sword and reluctant to go back to their earlier free spending ways."
However there are other reasons to be more optimistic about the economy, McGee said.
"We should also expect a continued strengthening of the job market and continued drop in the unemployment rate over the next 12 months," he said. Jobless rates have been falling, so hopefully that trend will continue.
- Larry Avila: 920-993-1000, ext. 292, or email@example.com; on Twitter @LarryAvila