Consumer confidence in full retreat
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NEW YORK -- Growing anxiety about jobs and uncertainty arising from this month's terrorist attacks pushed consumer confidence in September to its lowest level in nearly six years.
The Conference Board, a New York-based business group, on Tuesday reported its Consumer Confidence Index plunged to 97.6 from a revised 114 in August. The slide is the largest monthly point drop since it fell 23 points in October 1990, a few months after Iraq invaded Kuwait to spark the Persian Gulf War.
"You should read the Conference Board's report as basically confirming what we already knew, that by early September the economy had entered a new phase of deterioration," said Edward McKelvey, a senior economist at Goldman, Sachs & Co. The latest figure is based on data collected both before and after Sept. 11, when hijackers crashed commercial planes into the World Trade Center and the Pentagon. But the Conference Board said that the difference in the data collected before and after that date was insignificant and that the downward trend was already in place.
"(The index) would have fallen this far even without the attacks," said Lynn Franco, director of the Conference Board's Consumer Research Center.
Other analysts disagreed.
"When all is said and done, I'm sure the attack is going to be shown undermining confidence," said Mark Zandi, the chief economist at Economy.com. "A bunker mentality is descending on consumers and investors. Everyone is battening down the hatches."
Until the attacks, consumer spending remained one of the pillars of the struggling economy. But the erosion in confidence in September appeared to assure the country would slip into a recession.
"While consumers have managed to keep the United States out of a recession for several years now, that soon may no longer be the case," Franco said.
The last time consumer confidence fell below 97.6 came in January 1996, when the index stood at 88.4.
The markets fluctuated throughout the day following the release of the reports. The Dow Jones Industrial Average closed up 56.11 points to 8,659.97 and the Nasdaq Composite Index finished up 2.24 points to finish at 1,501.64.
The announcement of tens of thousands of layoffs in the airline industry following the attacks and uncertainty about the government's response them have deepened consumers' worries about their jobs, economists said.
"We do have to fear fear itself. It matters. It affects consumer spending," said Bill Cheney, chief economist at John Hancock Financial Services. "If people aren't confident, people don't spend and the economy is damaged by that."
The Conference Board reported that the percentage of consumers claiming jobs were "hard to get" climbed to 18.5 percent in September from 16 percent in August. As a result, they're less inclined to open their wallets, Franco said.
Expectations for the next six months were more pessimistic. The percentage of consumers who think business conditions will worsen increased to 15 percent from 10.7 percent. Those expecting fewer jobs rose to 21.9 percent in September from 17.7 percent in August.
Consumers also were less optimistic that their income would rise in the coming months, with 21.1 percent expecting an increase, down from 23.2 percent in August.
- Information from the New York Times was used in this report.
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