The September 11th attack
Consumer confidence at lowest since 1996
USA Today
Consumer confidence plummeted this month, battered by terrorism, a bleak job outlook and a discouraging business climate.
The Conference Board said yesterday that its consumer confidence index for September plunged to 97.6, down 16.4 points from August and the lowest since January 1996. The report gives one of the first statistical glimpses of the terrorist attacks' effect on the psyche of American consumers, whose free-spending ways have provided a bulwark against recession.
"That soon may no longer be the case," says the Conference Board's Lynn Franco, citing consumers' deepening pessimism about the next six months. Most interviewing for the index survey, which asks 5,000 households, occurred before the Sept.11 attacks. Post-attack interviewing mirrored a strong downward trend in confidence, Franco says.
Investors reacted to the report with a shrug. The Dow Jones industrial average closed at 8,660, up 56 points, or less than 1 percent.
The big drop in the index surprised economists, who had anticipated a decline about half as large. The decline is the biggest since October 1990, when Iraq occupied Kuwait and preparations for the Persian Gulf War were under way. Then, the index was running at 60 or below.
Joel Naroff of Naroff Economic Advisors says a successful military operation now would probably provide a beneficial jolt to consumer confidence, which surged in 1991 after the Gulf War.
The largely invisible enemies and relatively vague objectives of today's conflict may mean that such a jolt may not be in the offing, he says.
"We're outside the realm of economics, and we're all guessing at this point," he says.
In another sign of caution among consumers, UBS Warburg and the Bank of Tokyo-Mitsubishi reported a 0.8 percent decline in sales at chain stores last week. It was the fourth consecutive decline in the weekly snapshot, which tracks activity at seven giant discount- and department-store chains.
Jade Zelnik, chief economist at Greenwich Capital Markets, says the drop in the consumer confidence index adds to the likelihood Federal Reserve policymakers will approve yet another reduction in short-term interest rates. It would be the ninth cut this year.
