Higher SSI Taxes Leads to Steep Drop in Consumer Confidence in January
Economic research organization The Conference Board reports that consumer confidence in the U.S. slipped to its lowest level in more than one year in January as higher Social Security taxes have led to shrinking take-home pay. The organization’s confidence index fell 8.1 percent from December 2012 from 66.7 to 58.6, the lowest it has been since November 2011. The Conference Board blames the tax increase as the primary cause for the tumble leading the average American to be less optimistic about the first half of 2013.
Despite avoiding the fiscal cliff on January 1, Congress and the White House allowed Social Security tax cuts to expire leading to lighter paychecks during a time when wages are nearly stagnant. At the same time, economists predict that Q4 2012 economic growth slowed from a surprisingly high 3.1 percent in Q3 down to less than a 1 percent annual rate. Though consumer confidence has experienced recent declines, some parts of the economy are showing signs of revival, particularly the housing and construction industries.
Car sales reached a half-decade high last year climbing to 14.5 million, which is expected to add a further 1 million in 2013. Stocks are also near historic highs as S&P doubled its value from 2009 and is just shy of its record high 2007 performance. However, the economy remains too sluggish to positively affect the struggling job market. Though the addition of about 150,000 jobs per month over the past two years has been enough to slowly lower the national unemployment rate, it remains high at 7.8 percent.