Tuesday, October 26, 2004

Consumer confidence falls on job worries, oil


Consumer confidence falls on job worries, oil
By Barbara Hagenbaugh, USA TODAY

WASHINGTON — Consumer confidence fell for the third straight month in October as high energy prices, slower-than-expected job creation and presidential campaign mudslinging weighed on consumers' psyches, a report out Tuesday showed.

The Conference Board said its closely watched index of consumer confidence fell to 92.8 this month, down 4% from September and the lowest level since March. The decline was led by a large drop in consumers' expectations for the economy in six months, which also fell to the lowest level in seven months, the private firm, which surveys thousands of households every month via mail, said. Consumers' assessments about the current state of the economy also slipped.

Straszheim Global Advisors President Donald Straszheim called the numbers "ugly," saying the heightened rhetoric about the economy in the presidential campaigns is likely adding to other worries.

"People are ... nervous about the economy in 2005," he says. "Energy prices are up a long ways and the robust growth typical of early in a recovery is past."

While views about the current job market improved, expectations fell. Some 16.5% said they expected there will be more jobs six months from now, down from 17.8% in September. The percentage of consumers who said they expected there will be fewer jobs in six months was the highest since February .

Confidence is watched closely because consumer spending accounts for more than two-thirds of all U.S. economic activity.

But economists cautioned against becoming too gloomy, noting what consumers do is much more important than what they say they are feeling. On that front, a report out Tuesday from the International Council of Shopping Centers showed while sales at chain stores fell last week from the prior week, purchases were up a healthy 3.7% from a year ago.

"The overall sales' pace remains strong," ICSC's chief economist Michael Niemira says.

And some economists said they expect the decline in confidence will soon be reversed.

"Confidence should begin to improve in the next few months," says Scott Hoyt, director of consumer services at Economy.com, expecting job growth to pick up. "However, the gains will likely be slow ... and additional setbacks are not out of the question."

One of those setbacks could be continued high energy prices, Hoyt says. The news was not encouraging on that score Tuesday. The price of a barrel of crude oil trading in New York was up 8 cents in midday trading, leaving prices near the all-time high of $55.17 reached Friday.

High energy costs are seen as a drag on the economy because they force consumers and businesses to spend more money on energy and less in other parts of the economy. In addition to higher gasoline prices, consumers are facing large increases in their heating bills this winter for houses heated with not only heating oil but also with natural gas.