Consumer confidence falls sharply in July
NEW YORK (AP) – Consumers’ confidence in the economy was buffeted this month by the stock market drop, corporate scandals and the slow increase in available jobs, a private research group reported Tuesday. The New York-based Conference Board said its Consumer Confidence Index fell to 97.1 from a revised 106.3 in June. Analysts had been expecting a reading of 101.5.
However, economists said consumer confidence was still relatively strong, and the decline in the index was mostly an indicator of a poor stock market for most of the month.
“This shows that consumers were definitely shaken by the stock market sell-off,” said Mark Vitner, an economist at Wachovia Securities in Charlotte, N.C. “The rebound probably came too late to help out the confidence numbers.”
July’s figure is the lowest since February, when the index fell to 95.0 during congressional hearings on the Enron scandal. It is still well ahead of October’s figure of 85.3.
The index compares results to its base year, 1985, when it stood at 100.
The index is widely watched as a measure of attitudes toward the economy. However, economists say it is not always a good indicator of trends in consumer spending, which makes up about two-thirds of the nation’s economic activity.
“For some time, consumer confidence has been a backward-looking indicator of what the stock market has done,” said Brian Jordan, economist at Banc One Investment Advisors in Columbus, Ohio.
“To this point, there have been very few signs that consumers are pulling back significantly on spending,” he said. “We are far away from a recession.”
White House spokesman Ari Fleischer Tuesday said the economy is “solid” by many measures, including economic growth, low interest rates and inflation.
But, he said, “There’s no question that there are some worrisome signs, like consumer confidence, and that’s why the president has called on the congress to complete its action” on such measures as legislation that would grant Bush broader powers to negotiate international trade pacts.
The stock market dipped when the report was released but recovered later.
According to The Conference Board, the number of consumers rating current conditions as “bad” increased from 19.5 percent to 22.1 percent, while the number sizing up the conditions as “good” increased slightly, from 19.9 percent to 20.1 percent.
The number of consumers who said jobs are hard to get rose from 23.2 percent to 24.0 percent, with the number reporting jobs as plentiful falling from 20.1 percent to 18.8 percent.
Consumer expectations for the next six months have also dampened, the Board said. The number expecting a deterioration in business conditions rose from 7.1 percent to 9.2 percent, while those who foresee an improvement declined from 23.7 percent to 20.9 percent.
The outlook for jobs also soured, with 17.1 percent of consumers saying they expect fewer jobs to open up in the next six months, up from 14.3 percent.
The consumer confidence index is based on a monthly survey of some 5,000 U.S. households.
Sung Won Sohn, chief economist at Wells Fargo & Co. in Minneapolis, said the fact that the economy is recovering without a large growth in jobs was dampening consumer expectations.
However, “most economists expect employment to grow more rapidly in the future. Tomorrow looks brighter than what the confidence number painted for the month of July,” he said.
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