Consumer confidence plummets to lowest level in nearly a decade
NEW YORK -- Growing worries about the economy and war in Iraq drove down consumer confidence for a fourth consecutive month in March, a private research group said Tuesday.
The Consumer Confidence Index fell to 62.5 from a revised 64.8 in February, the New York-based Conference Board said. The reading was the lowest since October 1993, when the confidence index registered 60.5 as the country was slowly recovering from the 1991 recession.
Still, the March decline was slightly better than expected and not nearly as drastic as the 14-point drop experienced in February. Analysts had expected a reading of 62.0 in March.
The Conference Board's index is derived from responses received through March 18 -- before the start of war in Iraq -- to a survey mailed March 1 to 5,000 households in a consumer research panel.
The results released Tuesday are from a partial sample of at least 2,500 respondents and are subject to revision once the full sample -- typically 3,500 households -- is in.
"While a quick and successful outcome in the Middle East conflict would certainly ease some of the uncertainties facing consumers and therefore boost confidence, it is the economic fundamentals that will determine whether a rebound is sustainable," Lynn Franco, director of the Conference Board's Consumer Research Center, said in a statement accompanying the report.
"The end of the Gulf War in 1991 produced a surge in confidence, but labor market conditions quickly diminished the spark," she said. "So if history repeats itself, the current job scenario will do little to maintain any post-war surge in confidence."
Mark Vitner, an economist at Wachovia Securities in Charlotte, N.C., said he doesn't believe consumer confidence will improve until "we see that the war is coming to an end and that businesses are once again looking to hire workers and invest in capital."
He added that while the war had not yet begun when the March survey was taken, "the thought that we were going to war" was reflected in the number, along with worries about the stalling economy.
"That is what is weighing heavily on consumers," he said.
Economists closely monitor consumer confidence because consumer spending accounts for two-thirds of U.S. economic activity and, along with the housing market, has buoyed the struggling economy.
But consumers are spending more cautiously, and the big concern is that a prolonged war, mounting casualties or another terrorist attack could prompt shoppers to pull back even more, sending the economy back into recession.
In another sign consumers may be pulling back, the National Association of Real estate agents reported yesterday that sales of previously owned homes fell 4.3 percent. But bad weather kept house hunters indoors, and even with the decline, sales posted their fourth-best month on record.
Existing home sales came in at a seasonably adjusted annual rate of 5.84 million, representing a 4.3 percent decline from January's record high sales pace. Still, that was slightly better than the 5.80 million units analysts had been expecting, as decades-low mortgage rates helped continue the housing boom.
Wall Street moved moderately higher following Monday's steep sell-off as President Bush's prediction that U.S.-led forces will prevail in Iraq prompted bargain hunting by investors.
The Dow Jones industrial average closed up 65.55, or 0.8 percent, at 8,280.23. The Nasdaq composite index gained 21.23, or 1.6 percent, to 1,391.01, while the Standard & Poor's 500 index rose 10.51, or 1.2 percent, to 874.74.
The Conference Board Report indicated that consumers' appraisal of the business environment mirrored last month's readings.
Those rating business conditions as "bad" remained virtually unchanged at 29.8 percent. Just 13.8 percent viewed conditions as good. Consumers saying that jobs are hard to find rose to 32.3 percent from 30.0 percent. Those claiming that jobs are plentiful remained flat at 11.6. percent.
Consumers' short-term expectations in March were more pessimistic than in the previous month.
Those anticipating that business conditions will worsen over the next six months edged up to 19.9 percent from 19.1 percent. Consumers anticipating an improvement fell to 13.3 percent from 14.9 percent.
The employment outlook fared no better. Consumers anticipating that more jobs will become available in the next six months declined to 11.1 percent from 12.4 percent. Those expecting fewer jobs, however, dropped to 26.1 percent from 28.5 percent.
Consumers anticipating an increase in their incomes declined slightly to 15.8 percent from 16.0 percent in February.