Confidence report: 1 in 5 expects a drop in income

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Among the most distressing numbers in the dismal October consumer confidence report today are the ones measuring Americans’ expectations of their future income.

The Conference Board’s monthly confidence report, derived from questionnaires sent to 5,000 households, showed just 10.8% of respondents expected their income to be higher in six months. That was a record low in the 40-year history of the survey, and down from 15.1% in September.

Also, a record high 19.7% expected their income to be lower in six months, compared with 13.9% in September.

In October 2007, by contrast, the numbers were flip-flopped: 19.9% of those surveyed expected their income to be higher in six months and just 9.1% expected a drop in income.

The figures reflect people’s expectations for income they will receive from employment and/or from investments.

You could argue that the glass remains more than half full: 69.5% of those surveyed said they expected their income to be the same in six months, compared with 71% a year ago.

Still, when nearly 1 in 5 respondents sees a drop in income on the horizon, that’s another reason to be very worried about the outlook for consumer spending, which is what powers the economy. It suggests retailers will have an even harder time moving merchandise without severe markdowns.

Michael Darda, chief economist at MKM Partners in Greenwich, Conn., now is forecasting a decline in real (after-inflation) consumer spending in the current quarter ‘as large as those seen in the deep recessions of 1973-75 and 1980-82.’

The Conference Board survey also asked people about their plans for big-ticket purchases in the next six months.

Bad news for Detroit: Just 4.4% of respondents in the October survey said they planned to buy a car, down from 4.9% in September and down from 6.6% a year ago.

The percentage of people planning to take a vacation in the next six months was 38.7%, down from 45.8% at this time last year -- which suggests a major scaling-back of holiday travel plans compared with a year ago.