WASHINGTON -- Consumers remained uneasy about the U.S. economy this month and said they are less optimistic about jobs and income in the months ahead, according to the latest consumer confidence survey released yesterday by the Conference Board.
The business research organization's index for consumer confidence edged down to 76.3, from 77.7 in July, marking the second monthly decline in a row. The index is based on a 1985 reading of 100.
Although many government statistics show the economy is on the mend, the Conference Board report reinforced the view that consumers have not come out of their shells much since a brief rebound in confidence after the Persian Gulf war. The board's index, based on a survey of 5,000 households throughout the United States, has been down four of the last five months. The last big jump was in March, when it advanced to 81.1, from 59.4 in February.
"While many of the economic indicators suggest that a recovery is in progress, the evidence will not be convincing until there is a substantial improvement in consumers' spirits," said Fabian Linden, executive director of the board's consumer research center.
Last week, bond market hopes that the Federal Reserve will cut interest rates again dimmed after the Commerce Department reported that orders for durable goods in July soared 10.7%. Still, private economists say they do not rule out a cut in the discount rate to 5% and another reduction in the federal funds rate to 5.25%. They say this may happen if the bond market gets the impression of a weak recovery from the unemployment report for August that is to be released Sept. 6.
"The numbers are just bouncing around like mad right now," said Laurence H. Meyer, president of Laurence H. Meyer & Associates Ltd., in St. Louis. "This report is signaling that consumers aren't happy because real income growth is very low and employment gains are minimal."
Consumers boosted purchases of automobiles and other durable goods in the third quarter, but Mr. Meyer said he is worried the pace of outlays will not be sustained. "There's been a pop in consumer spending, but I think that's gone now. From here on in the going gets tougher."
John Silvia, chief economist for Kemper Financial Services Inc. in Chicago, was less pessimistic. There are sufficient gains in personal income and employment to keep spending on an upward path, and U.S. output should rise at an annual rate of roughly 3% over the next year, he said. "It's a little bit early to say consumer spending has stalled out."
The sluggish pace of money growth, low inflation, and a recovery that appears weaker than what Fed officials were banking on earlier this year could still give the Fed room to ease credit again, said Mr. Silvia. He estimates non-farm payroll jobs in August will be up roughly 50,000 after two consecutive monthly declines.
The Conference Board survey showed people were slightly more optimistic about present business conditions and employment. But expectations for jobs and income six months into the future were lower.
Spending plans over the next six months by those surveyed were marginally weaker. Plans to buy a car were cited by 6.2% who responded to the survey, down from 6.4% in July and 7.5% a year earlier. Interest in buying a home edged down to 2.7% from 2.9%, continuing a low level that has prevailed since March. On a more positive note, 29.7% of those surveyed said they plan to buy at least one major appliance, up from 27.9% in July.
