Consumer confidence index falls to 9-year low

January survey reflects worry over economy

January 29, 2003|By BLOOMBERG NEWS

WASHINGTON - U.S. consumer confidence declined to a nine-year low this month as more people said they were concerned that a deteriorating economy could threaten their jobs and pay.

The Conference Board's consumer confidence index fell to 79 from 80.7 in December. It was the index's lowest level since November 1993.

Economists had expected that the private research group's index would fall to 78.4, according to the median of 60 forecasts. The decline comes during a month in which energy costs rose, the threat of war with Iraq intensified and stock prices fell.

"The consumer is unsure and unsteady," said Drew Matus, a senior economist at Lehman Brothers Inc. in New York.

Confidence, as measured by the index, has fallen in seven of the past eight months, a fact that may be reflected in fewer purchases by households.

The economy has been helped by strength in the housing market, where new-home sales rose to a record last month.

About 976,000 new homes were sold last year, surpassing the 2001 record of 908,000, the department said. New homes sold at a 1.082 million-unit annual rate last month, the Commerce Department reported yesterday.

The lowest mortgage rates in four decades are making housing an attractive investment alternative as the stock market stumbles.

"As long as mortgage rates remain so low, housing should remain a pillar of strength for the economy," said Stephen Stanley, an economist at RBS Greenwich Capital in Greenwich, Connecticut.

The median price on a new home rose 3.4 percent last year, the government figures showed, compared with a 23 percent drop in the Standard & Poor's index of 500 stocks.

The Dow Jones industrial average gained 99.28 points yesterday, or 1.25 percent, to close at 8,088.04, and the Nasdaq composite index increased 16.91, or 1.28 percent, to 1,342.18.

New orders to U.S. factories for big-ticket goods - also known as durable goods - rose by 0.2 percent last month, the Commerce Department also reported yesterday. Though economists were expecting a much bigger increase of 1 percent, the report did improve from November, when new orders of durable goods fell by 1.3 percent.

The Energy Department reported that the price of gasoline is rising as crude oil costs increased because of the strike in Venezuela and over concerns that a possible war with Iraq will disrupt supplies.

The average price of all grades of gasoline at the pump rose to $1.52 a gallon in the week that ended Monday, the highest in 16 months, according to figures from the department.

Consumers "are going to hunker down and the higher oil prices will also take a bite out of spending," said Astrid Adolfson, a senior economist at McCarthy Crisanti and Maffei in New York.

The segment of the consumer confidence index that measures consumer expectations for the next six months fell to 81.4 from 88.1. The part of the index that tracks consumers' present situation rose to 75.4 this month from 69.6 in December.

The share of consumers who expect more jobs to become available six months from now fell to 14.3 percent, the lowest since October 2001, from 15.4 percent. The percentage of people who expect incomes to increase fell to 18.4 percent from 19.6 percent. The percentage expecting business conditions to worsen rose to 14 percent in January from 11 percent.

Consumers are more upbeat about present economic conditions. The percentage of consumers who saw jobs as plentiful rose to 14.5 percent this month, compared with 12.3 percent in December.

The percentage of consumers planning to buy a major appliance fell to 27.8 percent from 28.4 percent and the percentage expecting to buy a car dropped to 6.7 percent from 7.7 percent. But the share of consumers planning to buy a home increased to 3.4 percent from 3.2 percent.

The Conference Board surveys 5,000 households about economic conditions, job prospects and spending plans.

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