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Consumer Confidence Drops Sharply

Updated:
NEW YORK (AP) — Consumer confidence fell sharply in October to its lowest level in a year, a potentially worrisome sign for the approaching holiday retail season.

The New York-based Conference Board said its Consumer Confidence Index now stands at 135.2, a steep drop from the revised 142.5 reported in September and the record high of 144.7 registered in May and January.

The Conference Board index, based on a monthly survey of some 5,000 U.S. households, is closely watched because consumer spending accounts for about two-thirds of the nation's economic activity. The index compares results to its base year, 1985, when it stood at 100.

The October drop was ``triggered by a cooling economy and apprehension regarding soaring oil prices and volatility in the financial markets,'' said Lynn Franco, director of the Conference Board's Consumer Research Center. The last time it was this low was in October 1999, when it stood at 130.5.

In a separate report, the Commerce Department said Tuesday that new home sales soared in September by a larger than expected 9.2 percent to the highest level in six months.

In morning trading Tuesday, the Dow Jones industrial average was up about 3 points to 10,838, while the Nasdaq composite index was up 117 points to 3,309.

Recent developments, including stock market turbulence and a rise in jobless claims, made the slump in confidence almost inevitable, said Gary R. Thayer, chief economist for A.G. Edwards & Sons Inc. in St. Louis.

Nonetheless the economy remains strong amid slowing growth, and consumers are still relatively confident, if a little more cautious, Thayer said. That should not take retailers by surprise, he added.

``I think retailers have suspected all along that things were not going to be as great as they were last year, but it's still going to be pretty good,'' Thayer said. ``People may not be saying things are quite as rosy as they were, but I think they're still feel pretty good about the overall economic picture.''

Consumers were much less optimistic about the economy than just a month earlier, when the index rose on general optimism about the nation's business climate. But the optimism waned in October, with more consumers expressing doubts about business conditions and their ability to find new jobs.

Just 16.5 percent of people polled in the newest survey expect an improvement in business conditions over the next six months, down from 19 percent in September. The percentage anticipating conditions to worsen rose from 5.6 percent to 7.2 percent.

In addition, 13.1 percent of consumers surveyed say they expect fewer job openings, up from 10.9 percent last month.

In another sign of dimming expectations, just 24.2 percent expect their incomes to rise, a drop from the 28.1 percent who shared that viewpoint in September.

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On the Net: http://www.conferenceboard.org
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