Consumer confidence falls to 7 1/2-year low
By Lisi de Bourbon
Associated Press
NEW YORK — Americans' growing fears about anthrax and job security in the wake of the Sept. 11 terrorist attacks dragged down consumer confidence in October to its lowest level in 7 1/2 years, suggesting the economy will take longer than anticipated to rebound.
The New York-based Conference Board said yesterday its Consumer Confidence Index plunged to 85.5 from 97, well below the 96 reading analysts had predicted.
"We obviously expected consumer confidence to be shaken, but not this badly," said Oscar Gonzalez, an economist at John Hancock Financial Services in Boston.
The index, based on a monthly survey of some 5,000 U.S. households, is closely watched because consumer confidence drives consumer spending, which accounts for about two-thirds of the nation's economic activity.
The index compares results to its base year, 1985, when it stood at 100. The October figure is the lowest since February 1994.
Consumer spending has been one of the main factors preventing the economy from sliding into recession. Many economists now believe a recession is inevitable.
Companies have slashed hundreds of thousands of jobs since Sept. 11, but they had started trimming payrolls long before, in response to an economic slowdown that weakened earnings.
Analysts were particularly surprised by the drop given that another gauge of consumer sentiment rose in October. The University of Michigan reported last week that consumer sentiment increased to 82.7 from 81.8 in September.
Lynn Franco, director of the Conference Board's Consumer Research Center, said the group's survey is influenced more than others by changes in the labor market.
Another analyst suggested the stream of reports about anthrax and the threat of more attacks are darkening consumers' moods.
"My concern is tempered by the fact there's been such incessant media attention to the bombings and the anthrax situation," said Russell Jones, vice president of the retail industry sector at Cap Gemini Ernst & Young.
