Consumer confidence plummets

Don Hogsett, November 4, 2002

As Americans fretted over a possible war with Iraq and a lagging labor market, consumer confidence plunged in October far deeper than expected, The Conference Board reported, retreating to its lowest level in the past nine years, since November 1993.

Widely viewed as a barometer of future consumer spending, the single-biggest driver of the nation's economy, the bellwether gauge dropped for a fifth consecutive month, skidding down by 15.3 percent to a new reading of 79.4 from a revised level of 93.7 in September, the business think tank reported. It was the biggest one-month decline since a 17-point drop recorded between August and September 2001.

"A weak labor market, the threat of military action in Iraq and a prolonged decline in the financial markets have clearly dampened both consumers' confidence and their expectations for the near future," said Lynn Franco, director of The Conference Board's Consumer Research Center. "The outlook for the holiday retail season is now fairly bleak. Without the likelihood of a pickup in consumer spending, an already weak economic recovery could weaken further."

Assaying current economic conditions, consumers turned notably more negative, said The Conference Board. The number who rated current conditions "bad" increased to 27.6 percent from 23.8 percent. Correspondingly, the number who view conditions as "good," slipped to 15.6 percent from 18.5 percent.

Perhaps more than any other single indicator, the jobs outlook has historically weighed most heavily on the overall confidence level, and Americans have grown notably more apprehensive. The number who think jobs are hard to get climbed to 27.3 percent, up from 25.4 percent last month, while the number who find jobs are plentiful declined to 14.8 percent from 15.9 percent.

And their outlook for the future has deteriorated. The number who expect business conditions to weaken in the next six months climbed sharply higher, to 14.1 percent from 9.7 percent. The number expecting conditions to improve fell to 19.0 percent from 21.6 percent. The employment outlook also dropped, where the number who think more jobs will open up in the next six months falling to 15.0 percent from 17.3 percent. The number who expect fewer jobs to become available jumped up to 22.1 percent from 16.8 percent.

Consumer confidence by region

New England -17.2%
Middle Atlantic -23.6
East North Central -7.8
West North Central -10.7
South Atlantic -10.4
East South Central -10.7
West South Central -13.2
Mountain -15.6
Pacific -4.1

Consumer Buying Plans — October
plans to purchase over the next six months

Source: The Conference Board
Homes -6.1%
Carpets 12.3
Major Appliances +6.5
New Car +22.2
Used Car -13.3

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