Consumer Confidence Drops for 3rd Month

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The New York Sun

NEW YORK – Worries about job prospects drove consumer confidence lower in October for the third consecutive month, a New York-based private research group said yesterday. The decline was steeper than expected and raised questions about how consumers will spend during the critical holiday shopping season.


The Consumer Confidence Index dropped 3.9 points to 92.8, down from a revised 96.7 in September, according to The Conference Board. Analysts had expected a reading of 94.


The October figure is the lowest since March, when the reading was 88.5. The index had been rising since April, before falling 3 points to 98.7 in August and another 2 points in September.


“Subdued expectations, as opposed to eroding present-day conditions, were the major cause behind October’s decline in consumer confidence,” said Lynn Franco, director of The Conference Board’s Consumer Research Center. “And, while consumers’ assessment of the labor market this month showed a moderate improvement, the gain was not sufficient to ease concerns about job growth in the months ahead.”


Economists closely track consumer confidence because consumer spending accounts for two-thirds of all American economic activity.


The Expectations Index, one component of the Index that measures consumers’ outlook over the next six months, declined to 92.0 from 97.7. Meanwhile, The Present Situation index dipped to 94.2 from 95.3.


The Conference Board’s indexes are derived from responses received through October 19 to a survey mailed to 5,000 households in a consumer research panel. The figures released yesterday include responses from at least 2,500 households. The figures for October were revised after all the surveys for that month were tabulated.


The chief economist at the International Council of Shopping Centers, Michael P. Niemira, said that if the report’s results reflect simply a political statement, it is less worrisome for the holiday season or for the overall economy.


Deteriorating job expectations “could be tied to a vision of what the economy might be six months down the road, shaped by how effective Senator Kerry’s message is – whether you agree or not,” he said. Democrat John Kerry is challenging President Bush in next week’s presidential election.


But if the decline in consumer confidence is indicative of a “real deterioration,” than it is a troubling sign for the holiday season, he said.


Still, economists believe retailers are in a better position than a year ago, when consumer confidence measured 81.7 in October 2003.


Economists are awaiting October job figures from the Labor Department, due out November 5. Analysts are expecting the nation’s nonfarm payrolls to add 160,000 jobs. The country added a lower-than-expected 96,000 jobs in September as the unemployment rate held steady at 5.4%.


“The labor market is not doing well at this part of the cycle and that is the main factor driving consumer spending,” said an economist at John Hancock Financial Services, Oscar Gonzales.


The consumer confidence report showed that consumers’ assessment of overall current conditions was mixed. Those saying business conditions are “good” declined to 21.7% from 23.4%. Those saying conditions are “bad” edged up to 21.4% from 20.4%. On the employment front, consumers saying jobs are “plentiful” increased to 17.4% from 16.6%, while those claiming jobs are “hard to get” eased to 27.8% from 28.0% in September.


Consumers’ outlook for the next six months turned more cautious. Those anticipating conditions to worsen increased to 10.3% from 9.4%.Consumers expecting business conditions to improve decreased to 20.6% from 21.6%.


The employment outlook was also more subdued. Consumers expecting fewer jobs to become available in the coming months rose to 18.4% from 16.2%, while those anticipating more jobs to become available slipped to 16.5% from 17.8%.


The New York Sun

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