Consumer confidence falls 4th month in row

Stock dip hurts mood, but if it slows buying, rates would be safe

October 27, 1999|By BLOOMBERG NEWS

NEW YORK -- Consumer confidence in the U.S. economy fell this month for the fourth consecutive month amid concern over declining stock prices, a private industry group said yesterday.

The Consumer Confidence index dropped to 130.1 from 134.2 in September, the New York-based Conference Board reported. That put the index 3.5 percent below a 30-year high of 139 in June and at its lowest level since January.

The Dow Jones industrial average has fallen 9 percent since Aug. 25, just after Federal Reserve policy-makers raised interest rates for the second time in less than two months. "Confidence sags every time the stock market sags," said Chris Rupkey, a senior financial economist at Bank of Tokyo-Mitsubishi Ltd. in New York.

The decline in confidence could signal a slowdown in consumer spending and lower interest rates in the months ahead if it keeps the Federal Reserve from raising interest rates no more than one more time, analysts said. It "will make the Fed feel more confident about their slower GDP forecast for 2000" of 2.5 percent to 3 percent, Rupkey said. Growth averaged close to 4 percent in the past three years.

Even after this month's decline, the index is still above the year-earlier reading of 119.3. That was also the last time the confidence index fell four consecutive months, as turmoil in global financial markets caused the index to drop to its lowest since April 1997.

In another report yesterday that indicated that the economy may be slowing, the Commerce Department said incomes increased by a slight 1.3 percent, or $92.6 billion, in the second quarter after a 1.2 percent gain in the first quarter.

Three Plains states -- Nebraska, Kansas and Iowa -- as well as the Western states of Nevada and Arizona recorded the fastest income growth in the quarter. The slowest income growth was in West Virginia, Alaska, North Carolina and New York.

Personal income is wages and salaries received by people working in industry and government as well as any rental income, dividends, interest or government transfer payments such as unemployment benefits.

Steady growth in incomes has been a driving force behind the current U.S. expansion, now in its ninth year of unbroken growth since the last recession in 1990-1991.

Consumers' assessments of their current situations, their expectations for the economy in the next six months and their perceptions of job availability also fell to the lowest levels since January, the Conference Board report showed.

The index gauging current conditions fell to 173.5 this month from 176.3 last month, and the six-month expectations index dropped to 101.1 from 106.2. Economists had expected an overall reading of 132.6.

The share of consumers surveyed who saw jobs as "hard to get" rose to 13.3 percent -- the largest since January -- from 12.7 percent last month. Those expecting incomes to increase fell to 23.1 percent from a revised 26.8 percent a month before.

The number of consumers planning to buy houses fell to 3.9 percent this month from 4.3 percent last month. Those planning to buy autos rose to 9.1 percent from 8.8 percent.

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