Consumer confidence plunges on higher taxes
By MARTIN CRUTSINGER AP Economics Writer Published: Jan 29, 2013 at 8:58 AM PST
WASHINGTON (AP) — U.S. consumer confidence plunged in January to its lowest level in more than a year, reflecting higher Social Security taxes that left Americans with less take-home pay.
The Conference Board said Tuesday that its consumer confidence index dropped 8.1 points in January from December to a reading of 58.6, the lowest since November 2011.
The index has declined for three straight months since hitting a nearly five-year high of 73.1 in October 2012. It's still above the post-recession low of 40.9 reached in October 2011.
Conference Board economist Lynn Franco said the tax increase was the key reason confidence tumbled in January, making Americans less optimistic about the next six months.
For a worker earning $50,000 a year, take-home pay will shrink this year by about $1,000.
"It may take a while for confidence to rebound and consumers to recover from their initial paycheck shock," Franco said.
The index fell sharply in December as congressional Republicans and President Barack Obama moved closer to the fiscal cliff without reaching a resolution on sharp spending cuts and tax increases.
Congress and the White House ultimately struck a deal on Jan. 1 to prevent income taxes from rising on most Americans. But they delayed the spending cuts for only two months. And they allowed a temporary cut in Social Security taxes to expire.
The survey was conducted through Jan. 17, at which point most people began to realize their paychecks were lighter.http://www.kpic.com/news/business/188854861.html