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Consumer confidence takes dive

High fuel prices, hurricanes and a declining jobs outlook create a drop that may cast a pall over the holiday season.

By HELEN HUNTLEY
Published September 28, 2005

Americans are losing their confidence in the nation's economy and their financial futures at the most dramatic pace since the fall of 1990, when Iraq had just invaded Kuwait and U.S. troops were mobilizing in the Middle East.

The national Consumer Confidence Index dropped nearly 19 points this month, the steepest one-month decline in 15 years. The drop, and an accompanying drop in Florida's Consumer Confidence Index, brought both measures down to their lowest levels since 2003.

The consumer confidence figures reflect what consumers think of the economy, expectations for the future and the state of their personal finances. As in 1990, high gas prices are one of the major causes of concern.

"Hurricane Katrina, coupled with soaring gasoline prices and a less optimistic job outlook, has pushed consumer confidence to its lowest level in nearly two years and created a degree of uncertainty and concern about the short-term future," Lynn Franco, director of the Conference Board's Consumer Research Center, said in a statement Tuesday.

Franco said similar shocks in the past have had a short-term effect and predicted confidence would rebound to "more positive levels by year-end or early 2006."

But the numbers do not bode well for retailers for the upcoming holiday season.

"It is fairly certain that the effects of high energy prices, higher interest rates and concern over the hurricanes will result in a very weak holiday shopping season," said Chris McCarty, director of the Florida Consumer Confidence Survey.

And that's only part of what consumers are worried about. Bigger bills for insurance, property taxes, utilities and health care also are taking a toll.

"It is demoralizing," said Lynn Smith of St. Petersburg, one of many St Petersburg Times readers who have recently shared their thoughts about the economy as part of a newspaper analysis of the effect of rising costs. "I keep working harder to make more money, but there is no way for the income increases to keep up with the cost of living."

The national Consumer Confidence Index fell from 105.5 in August to 86.6 in September. The Conference Board, which compiles the index, said 20 percent of those surveyed expected business conditions to worsen in the next six months while 15 percent expected them to improve.

The Florida Consumer Confidence Index, which is compiled by the Bureau of Economic and Business Research at the University of Florida, dropped from 89 in August to 78 in September. The decline was greater among those younger than 60 than it was for older Floridians, who were more pessimistic.

McCarty, director of the Florida survey, said the change may reflect the great effect of higher gasoline prices on those who commute to work.

The Times has heard from a wide span of ages about economic concerns.

"The country has overextended itself, people have overextended themselves and we're not equipped to accommodate changes in the economy," said Adam Coovadia, 29, of St. Petersburg. "We're sliding rapidly into recession and maybe even into depression because we don't have a plan to fix anything right now."

Many retirees said they worry about their futures.

"You work hard all your life, you figure you've got yourself set up for retirement and then everything keeps going up," said Larry Clanton, 69, of Palm Harbor. He said his wife, who is 68, went back to work part-time, something he would like to do himself if his health were better.

The Florida survey found fewer people see this as a good time to buy major household items. That concern about spending was reflected in many comments from Times readers.

"If I want any new clothes, I've been hitting up the thrift shops and consignment shops more often now and trying to keep away from the mall and other places with brand name requirements," said Rita Webb, 26, of Clearwater.

William O'Lynnger, 37, said his Spring Hill family, which recently welcomed a third child, is wearing hand-me-down clothing and saving electricity by drying clothes on the clothes line and washing dishes by hand.

Some are thinking ahead to the holidays.

"I've cut back my Christmas gift list," said Kandi Byrd, 43, of Tampa. "I'm going to be doing baked gifts and handmade crafts instead of store-bought items."

Helen Huntley can be reached at huntley@sptimes.com or 727 893-8230.

[Last modified September 28, 2005, 02:30:38]