This Morning's Business Cycle Indicator: Consumer Confidence

A decline in consumer confidence, possibly heralding a future decline in consumption spending. Still, this morning's news is good news: consumer confidence did not fall by as much as people thought it might.

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WSJ.com - Economy: NEW YORK -- Consumer confidence fell for the fourth consecutive month in September, slipping to its lowest level since November, a private research group reported Tuesday.The Conference Board said its consumer confidence index fell to 93.3 from a revised 94.5 in August. August's index had previously been reported at 93.5. Still, economists had expected September's reading to drop even further to 92.2, according to a survey by Dow Jones Newswires. The index compares results to its base year, 1985, when it stood at 100...

Consumer Confidence Falls
For Fourth Straight Month

NEW YORK -- Consumer confidence fell for the fourth consecutive month in September, slipping to its lowest level since November, a private research group reported Tuesday.

The Conference Board said its consumer confidence index fell to 93.3 from a revised 94.5 in August. August's index had previously been reported at 93.5.

Still, economists had expected September's reading to drop even further to 92.2, according to a survey by Dow Jones Newswires. The index compares results to its base year, 1985, when it stood at 100.

"Weak labor market conditions continue to erode confidence," said Lynn Franco, director of the group's research department. "But while consumers are not as positive about current business conditions, they are more optimistic about the outlook than last month. Historically, this trend is prevalent during a recovery."

In the past month, consumers have become more divided in their assessments of the present economic situation, but more optimistic about prospects for upcoming months, the group said.

Economists said pessimism about the present is probably a sign consumers are worried not only about jobs, but also about the political and military tension over a possible war with Iraq.

They said the report hints at the chances for a rebound by consumers, but raises questions about their willingness to continue spending.

"Consumers will continue to keep this economic ship afloat, but this pace of consumer spending on autos and housing cannot be maintained," said Sung Won Sohn, an economist with Wells Fargo & Co. in Minneapolis. "The economic stool is still wobbling."

The group's present situation index, which measures consumer sentiment about business conditions at the moment, declined to 88.5 from 93.1. But its expectations index, gauging feelings about the future, rose to 96.5 form 95.5.

Even the numbers behind those numbers were mixed.

For example, when asked about current conditions, the percentage of respondents rating business conditions as "good" rose to 18.2% from 16.7%. But that was countered by those who saw conditions as "bad," a percentage that rose to 23.3% from 21.8%.

The index, based on a monthly survey of 5,000 households, is closely watched because confidence fuels consumer spending, which accounts for about two-thirds of the nation's economic activity.

Posted by DeLong at September 24, 2002 11:05 AM | Trackback