Consumer Confidence Takes Unexpected Plunge

ByJohn S. McClenahen The U.S. economy may be building some momentum in its recovery from recession, but American consumers don't necessarily believe it. The Conference Board's Consumer Confidence Index, based on a representative sample of 5,000 households, plunged unexpectedly this month to 76.6 (1985=100). That's 6.9 points below June's level of 83.5 and more than eight points below the 84.9 reading that economists generally expected for July. "The rising level of unemployment and sentiment that a turnaround in labor market conditions is not around the corner have contributed to deflating consumers' spirits this month," says Lynn Franco, director of the Consumer Research Center at the Conference Board, a New York-based business research group. "Expectations are likely to remain weak until the job market becomes more favorable," says Franco. Additional job market statistics are due out this week. On July 31 the U.S. Labor Department will report the number of initial claims last week for unemployment insurance. Economists expect them to rise again above 400,000, a reversal of course from their surprising fall to 386,000 for the week ending July 19. On Aug. 1 the Labor Department will report employment data for July. Even with the anticipated addition of 9,000 jobs during the month, the unemployment rate is expected to remain at 6.4%.