Economic Life

September 1, 2004
Drop in Consumer Confidence Unexpectedly Steep in August
By THE ASSOCIATED PRESS

y The Associated Press

Consumers' renewed worries about job prospects led to a bigger-than-expected drop in confidence in August and provided more evidence of the fragility of the economic expansion.

The consumer confidence index, which had been rising since April, dropped 7.5 points, to 98.2, from a revised reading of 105.7 in July, according to a report yesterday from the Conference Board, a private research group.

The reading was well below the 103.5 that analysts had expected, and was the lowest since May, when it registered 93.1.

"The slowdown in job growth has curbed consumers' confidence," Lynn Franco, director of the group's Consumer Research Center, said in a statement. "The level of consumer optimism has fallen off and caution has returned. Until the job market and pace of hiring pick up, this cautious attitude will prevail."

Economists track consumer confidence closely because spending by consumers accounts for two-thirds of economic activity.

The report of the surprisingly large decline in consumer confidence came a day after the Commerce Department said consumers spent more freely in July, raising hopes that an economic pause in June would be only temporary. The government disclosed at the same time, however, that personal incomes in July grew more slowly than analysts had expected.

But some economists said they were not deeply concerned about the dip in confidence.

Mark Vitner, an economist at Wachovia Securities, said he saw the latest snapshot of consumer confidence as a "bump in the road" and expected the index to rebound in September. "Consumers still sense that the recovery is on track, and they are expressing their concerns on the lack of job growth," he added.

Consumers' assessment of current conditions was less upbeat than last month. Those saying business conditions were "good" declined to 23.2 percent from 25.2 percent. Those saying conditions were "bad" rose to 20.1 percent from 19.1 percent.

Consumers saying jobs were "plentiful" decreased to 18.1 percent from 19.7 percent while those claiming jobs were "hard to get" were nearly unchanged at 25.8 percent compared with 25.7 percent in July.




Copyright 2004 The New York Times Company