Discount The Drop In U.S. Consumer Confidence

Jan. 13, 2005
By John S. McClenahen Because consumer spending accounts for about two-thirds of U.S. economy, there would be a natural and predictable tendency to be very concerned about September's drop in the Conference Board's Consumer Confidence Index, the fourth ...
ByJohn S. McClenahen Because consumer spending accounts for about two-thirds of U.S. economy, there would be a natural and predictable tendency to be very concerned about September's drop in the Conference Board's Consumer Confidence Index, the fourth consecutive monthly decline. The New York-based business research group's index now stands at 93.3 (1985=100), down 1.2 percentage points from August, a product of a continuing weak U.S. labor market. However, don't overlook the fact that while a representative sample of 5,000 U.S. households is not now as optimistic about current business condition as it was a month ago, people are a bit more optimistic about the future than they were in August. The Conference Board's "Expectations Index," a component of the larger consumer confidence measure, rose slightly to 96.5 in September from 95.5 in August. What's more, notes Karen Dexter, an economist at Merrill Lynch & Co., New York, "confidence measures have not been the best predictor of [consumer] spending this summer." She points out while consumer confidence fell in July and August, consumer spending remained strong. Indeed, she says consumer spending probably is growing at a 4.5% to 5% annual rate in the current calendar quarter.

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