Consumer Confidence Drops For Second Month in a Row
For the second straight month, consumer confidence in the economy plunged, reinforcing concerns about the recession and a weak holiday season.
The Conference Board said on Tuesday that its index of consumer confidence fell to 50.6, down almost 10 points from October. The index, which was fixed at a base of 100 in 1985, is now three points lower than it was during the depths of the 1982 recession. In October, the index fell almost 13 points.
"I knew it was bad out there," said Richard C. Hartnack, vice chairman of Union Bank in San Francisco. "I didn't know it was that bad."
Michigan Survey Agrees
The uneasy sentiment was reinforced by reports that the University of Michigan's index of consumer sentiment "dimmed substantially," causing government bond prices to rise. Traders speculated that the Federal Reserve Board may soon lower interest rates again.
The survey, which was not made public, is factored into the U.S. Commerce Department's index of leading indicators.
An immediate concern for bankers and economists is that holiday spending will be too weak to stimulate a recovery.
"It doesn't bode well for the fourth quarter, particularly as it comes the same week as the traditional start of the holiday shopping season," said Richard Stein, associate economist at CoreStates Financial Corp.
The Conference Board found consumers wary about spending for big-ticket items as well. Of 5,000 people surveyed in early November, 6.1% said they expect to buy a car within the next six months. That's down from 7.5% in October. Only 2.7% of those questioned said they plan to buy a house in the next half year, compared with 3.3% during the previous month.
"People are going to pull back on credit even more," said a disappointed William A. Cooper, chairman and chief executive officer of TCF Financial Corp. in Minneapolis.
The steep plunge in confidence was recorded over the past two months across "all age groups, income brackets, and regions of the country," said Fabian Linden, executive director of the board's Consumer Research Center, in a prepared statement. "This is the classical profile of recession."
In November, survey respondents said they were more concerned about the economy than they were last month. And they believe things will get progressively worse in coming months.
PHOTO : Sharp Decline