Amid growing worries about jobs in the recession-wracked economy, U.S. consumer confidence tanked in October, boding ill for the key holiday shopping season, the Conference Board said on Oct. 27.
The private research firm said its consumer confidence index declined for the second month in a row, to 47.7 in October from a revised 53.4 in September. The September reading initially was reported at 53.1.
The decline in the October index was much steeper than expected by Wall Street, with most analysts expecting a 53.5 reading.
The downbeat start of the fourth quarter raised a red flag over consumer spending, which drives about two-thirds of activity in the world's largest economy and is particularly crucial for retailers' year-end holiday sales.
Lynn Franco, research director of the Conference Board, said that labor market condition played "a major role in this grimmer assessment."
"Consumers also remain quite pessimistic about their future earnings, a sentiment that will likely constrain spending during the holidays."
The October consumer confidence index, based on a survey of 5,000 households, showed that consumers had turned markedly more pessimistic about current conditions, driving the "present situation" sub-index to its lowest reading in 26 years -- 20.7 -- from 23.0 in September. Those claiming business conditions are "bad" rose to 47.1% from 46.3%, while those viewing conditions as "good" dropped to 7.7% from 8.6%.
The survey found consumers were more worried about the ailing job market, where the unemployment rate hit a new 26-year high of 9.8% in September. Those claiming jobs are "hard to get" vaulted to 49.6% from 47%, while those saying they were "plentiful" fell to 3.4% from 3.6%.
The outlook over the next six months also deteriorated sharply, with expectations index sinking to 65.7 from 73.7. The percentage of consumers expecting business conditions to improve declined to 20.8% from 21.3%, while those expecting them to worsen rose to 18.3% from 14.6%. Those expecting more jobs in the months ahead slid to 16.3% from 18%, while those expecting few jobs jumped to 26.6% from 22.9%.
Those expecting an increase in their incomes fell to 10.3% from 11.2%.
The dismal confidence report came ahead of the government's highly anticipated first estimate of economic activity in the third quarter, due Oct. 29. The official data is expected to show U.S. gross domestic product (GDP), or output of goods and services, grew between 3% and 4% in the July-September period after four negative quarters in a row.
Most analysts expect the GDP expansion to stall in the fourth quarter and unemployment, a lagging indicator in economic recovery, to hit double digits before slowly recovering.
Copyright Agence France-Presse, 2009