Of Two Minds

Economy: With consumer confidence down and spending up, shoppers wrestle with `stop-and-go' mixed signals.

September 01, 2004|By Andrea K. Walker | Andrea K. Walker,SUN STAFF

Consumers' minds these days are about as jumbled as the racks at Filene's Basement at closing time.

Consumer confidence took a sharp downward turn in August, according to a report by the Conference Board, a private research group. But just a day earlier, the Commerce Department reported spending was up slightly despite tepid job growth.

The 32,000 jobs that employers added to payrolls in July was the smallest gain this year, and a sign to some that the economic engine had once again stalled. Economists expected 230,000 new jobs, about seven times as many as created.

A jumble of mixed signals are weighing on consumers these days. A shaky job market, the supercharged rhetoric of the presidential campaign, turbulent gasoline prices and terrorism fears are pressing against fierce retail competition and credit so available that you can use plastic to buy a Big Mac. The U.S. economy, heavily dependent on consumer spending, hangs in the balance.

After rising steadily since April, consumer confidence took a drastic dip last month. The Consumer Index dropped to 98.2 from 105.7 in July, the Conference Board reported - though still higher than it has been since the start of the year.

"It's been a stop-and-go pattern," said Lynn Franco, director of the Conference Board's Consumer Research Center in New York. "We saw earlier this summer where a strong growth in the labor market helped increase confidence. Now it's causing consumers to pause and return to cautious spending they had earlier this year."

"The present situation has declined from where it was in July, but it's not in a red-flag territory," Franco said. "So we shouldn't see spending fall off the charts, but we wouldn't expect to see it pick up that much."

Yesterday, Alicia Smith, 47, of Baltimore was busy buying an Easy Bake Oven and a Shrek punching bag for her grandchildren at Security Square Mall in Woodlawn, undeterred by her yearlong job search after being laid off as a secretary.

"I try to look for bargains," said Smith, who collects unemployment. "But if it's something I really want, I buy it."

Lisa Bayne of Perry Hall took a two-year leave from teaching since having a baby, but shops as she did when she had a job, she said. Yesterday, she was buying a wedding gift at Towson Town Center, with her 4-month- old daughter, Sydney.

The economy "is something to watch," she said, but "people's attitudes don't change with it. If they want something, they're going out and buying it."

And Chantel Spence, 32, has noticed a slowdown in business at the shoe store she manages as she saves to buy a house. "It makes me more conscious of what I'm spending," she said as she bought school clothes yesterday at Security Square for her two daughters.

Attitude plays a large role in American shopping habits, said Oksana Palijczuk of Baltimore, who picked up a sweater yesterday at Towson Town Center.

"I don't need a blessed thing, but I'm looking to buy," Palijczuk said. "It's not about need, but want."

There is evidence that "want" has started to go wanting. Sales for the last week of August fell by 0.2 percent on a week-over-week basis, according to the International Council of Shopping Centers. The trade group lowered estimates for August sales - to an increase of between 1.5 percent and 2 percent compared with a year ago - because of dismal sales and a variety of factors, including higher gasoline prices and Hurricane Charley's devastation in Florida.

"All of this ... makes it hard to tell how much the slowdown is attributed to the economy or these special factors," said Michael Niemira, the international council's chief economist and director of research.

Retail leader Wal-Mart Stores Inc. also lowered its sales forecast last month, noting sluggish back-to-school sales and Hurricane Charley.

But there are good signs. The Department of Commerce reported Monday that spending rose 0.8 percent in July. And consumer confidence is higher than it was in May.

The signals could shift again as early as Friday when the Labor Department releases the latest job figures. Analysts predict an additional 150,000 jobs.

"Our baseline forecasts assumes that we do see a pickup in job growth and some moderation in energy prices," said Scott Hoyt, director of consumer economics at Economy.com. "The combination ... will boost consumer confidence and spending."

And if consumers feel they have money, they do seem in the mood to part with it, Hoyt said.

"They're not going on a spending spree," he said, "but they're spending."

Sun staff writer Tricia Bishop contributed to this article.

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