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Consumer Confidence Plummets in
September
Yahoo News/AP
By ANNE D'INNOCENZIO
September 27, 2005
AP Business Writer
NEW YORK - Consumer confidence plummeted almost 19 points in September, its
biggest drop in 15 years, as Americans worried about the economic fallout of
Hurricane Katrina and rising gasoline prices.
The Conference Board said its Consumer Confidence Index, compiled from a
survey of U.S. households, dropped 18.9 points to 86.6, from a revised reading
of 105.5.
That marked the biggest fall since October 1990 when the index fell 23
points to 62.6 in the wake of the recession. The September reading was also the
lowest level since October 2003, when it registered 81.7.
Analysts had expected the September reading to be 98.
"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. "Historically, shocks have had a
short-term impact on consumer confidence,especially on consumers'
expectations."
Franco added, however, that as rebuilding efforts in the aftermath of
Katrina take hold and job growth gains momentum, consumers' confidence should
rebound and return to "more positive levels by yearend or early 2006."
Economists closely track consumer confidence because consumer spending
accounts for two-thirds of all U.S. economic activity.
Wall Street took the news of the plunge fairly well. The Dow Jones
industrials, up about 30 points before the index was released, fell into
negative territory but were only marginally lower.
One component of the Conference Board report, which examines consumers'
views of the current economic situation, fell to 108.9 from 123.8. Another
component, the Expectations Index, which measures consumers' outlook over the
next six months, dropped to 71.7 from 93.3 last month.
The Conference Board index is derived from responses received through Sept.
20 to a survey mailed to 5,000 households in a consumer research panel. The
figure released Tuesday include responses from at least 2,500 households.
Consumers' overall assessment of ongoing conditions was considerably less
favorable in September. Those claiming business conditions are "good" declined
to 25.2 percent from 29.7 percent. Those claiming conditions are "bad"
increased to 17.7 percent from 15.1 percent. The employment picture was also
less upbeat. Consumers saying jobs are "hard to get" increased to 25.4 percent
from 23.1 percent, while those claiming jobs are "plentiful" fell to 20.1
percent from 23.6 percent.
Consumers' outlook for the next six months turned considerably pessimistic.
Those anticipating business conditions to worsen increased to 19.8 percent from
10.0 percent. Those expecting business conditions to improve declined to 15.3
percent from 18.7 percent.
The outlook for the labor market also soured. Those expecting more jobs to
become available in the coming months decreased to 14.0 percent from 16.4
percent in August. Those expecting fewer jobs increased to 25.0 percent in
September, up from 17.3 percent in August. The proportion of consumers
anticipating their incomes to decrease in the months ahead rose to 10.8 percent
from 8.9 percent last month.
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