U.S. Consumer Confidence Plummets

Like air pressure in the eye of an approaching hurricane, consumer confidence in the U.S. economy plummeted this month. The Conference Board's consumer confidence index, which had rebounded in August to 105.5 (1985=100), fell nearly 20 points to 86.6, the New York-based business research group reported on September 27.

"Hurricane Katrina, coupled with soaring gasoline prices and a less optimistic job outlook, has pushed consumer confidence to its lowest level in nearly two years . . . and created a degree of uncertainty and concern about the short-term future," says Lynn Franco, director of the Conference Board's consumer research center. Consumers claiming business conditions are good declined to 25.2% in September from 29.7% in August, and those characterizing business conditions as bad increased to 17.7% from 15.1%. The Conference Board's consumer confidence index is closely watched because consumer spending accounts for about two-thirds of the U.S. economy.

Consumers are pessimistic about the next six months as well, with those expecting business conditions to worsen rising to 19.8% in September from 10% in August. Those expecting fewer jobs rose to 25% in September from 17.3% in August. And the proportion of consumers anticipating a decrease in their incomes rose to 10.8% in September from 8.9% in August.

Franco does foresee an eventual improvement in consumer confidence, however. "As rebuilding efforts take hold and job growth gains momentum, consumers' confidence should rebound and return to more positive levels by yearend or early 2006."

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