Consumer confidence falls in October to the lowest level in 2 years
The New York-based Conference Board said Tuesday that its Consumer Confidence Index fell to 95.6 from a revised 99.5 in September. It was the lowest reading since 85.2 in October 2005 when gas and oil prices soared after hurricanes Katrina and Rita pummeled the Gulf Coast. Analysts had expected 99.5.
The report heightens worries for retailers, who are already bracing for a challenging holiday shopping season after a disappointing fall. The results also rattled investors, sending Dow Jones industrial average down 62.75, or 0.45 percent, to 13,807.51.
"Further weakening in business conditions has, yet again, tempered consumers’ assessment of current-day conditions and may very well be a prelude to lackluster job growth in the months ahead,“ said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. "In addition, consumers are growing more pessimistic about the short-term future and their rather bleak outlook suggests a less than stellar ending to this year.
The Present Situation Index, which measures how shoppers feel now about the economy, declined to 118.8 in October from 121.2 in the prior month. The Expectations Index, which measures shoppers’ outlook over the next six months, declined to 80.1 from 85.0.
Economists closely monitor confidence since consumer spending accounts for two-thirds of U.S. economic activity.
With Christmas just about eight weeks away, shoppers are contending with a slew of problems: higher food and gas prices, a deepening housing slump and tighter credit, among them.
And while the Federal Reserve is expected to cut interest rates on Wednesday to boost the economy and lure more investors into the troubled credit markets, economists say the move is probably too late to aid the holiday season, which accounts for up to 40 percent of retailers’ annual revenue.
A report on U.S. home prices Tuesday offered little hope that housing prices will recover soon. According to the S&P/Case-Shiller index, U.S. home prices fell nationwide in August for the eighth consecutive month.
For those who watch the economy, the big concern is that the lower home prices, declining consumer sentiment and rising prices for food and fuel will undermine what has been, until now, a healthy jobs market.The Labor Department is expected to show an increase of 80,000 jobs in October when it releases its monthly report on Friday. Unemployment is expected to remain steady at 4.7 percent.
The Consumer Confidence report – derived from responses through Oct. 23 – showed a weakening of confidence in the job market, however.
Those saying jobs are "hard to get“ increased to 22.6 percent from 22.4 percent. Those claiming jobs are "plentiful“ decreased to 24.1 percent from 25.6 percent in September.
The outlook for the labor market was also less optimistic. The percentage of consumers expecting more jobs in the months ahead was unchanged at 13.5, but those anticipating fewer jobs increased to 20.1 percent from 18.7 percent.