Index of consumer confidence plunges to 7 1/2-year low, well below analysts' expectations
Tuesday, October 30th 2001, 12:00 am
By: News On 6
NEW YORK (AP) _ Consumer confidence plummeted in October to its lowest level in 7 1/2 years as the Sept. 11 terrorist attacks sapped Americans' optimism about job security and the economy.
The New York-based Conference Board said Tuesday that its Consumer Confidence Index sank to 85.5 from 97 in September. Analysts were expecting a reading of 96.
``Widespread layoffs and rising unemployment do not signal a rebound in confidence anytime soon,'' said Lynn Franco, director of the Conference Board's Consumer Research Center. ``With the holiday season quickly approaching, there is little positive stimuli on the horizon.''
The index, based on a monthly survey of some 5,000 U.S. households, is closely watched because consumer confidence drives consumer spending, which accounts for about two-thirds of the nation's economic activity.
The index compares results with its base year, 1985, when it stood at 100. The October figure is the lowest since February 1994.
Consumers have been one of the main factors preventing the economy from sliding into recession. But many economists now believe a recession is inevitable because of the fallout from the attacks.
Employers have slashed hundreds of thousands of jobs since hijackers rammed commercial jets into the World Trade Center and the Pentagon.
But companies had already started trimming payrolls well before the attacks in response to an economic slowdown that triggered weakened earnings and a slump in stock prices.
To help revive the economy, the Federal Reserve has cut interest rates nine times this year, with two reductions coming after the attacks A 10th cut is expected when policy-makers meet next month.
The Conference Board said consumers' assessment of the current economic climate grew more pessimistic over the past month. Consumers rating current business conditions as bad rose to 20.6 percent in October from 18.3 percent in September, while those who thought conditions were good declined to 18.9 percent from 22.3 percent.
The board also said that expectations for the next six months continued to deteriorate. The percentage of consumers who think business conditions will worsen rose to 20.3 percent from 15.8 percent, while those expecting fewer jobs climbed to 28.9 percent in October from 22.5 percent in September.
The Conference Board is a nonprofit research and business group, with more than 2,700 corporate and other members around the world.