CONSUMER confidence slips in July; ongoing worries about jobs cited, Conference Board says
Tuesday, July 31st 2001, 12:00 am
By: News On 6
NEW YORK (AP) _ Consumer confidence skidded in July, underscoring ongoing worries about jobs and the future of the U.S. economy, though consumer spending should continue to hold up, a private research group said Tuesday.
The New York-based Conference Board said its Consumer Confidence Index fell to 116.5, down from a revised 118.9 in June. The latest reading came on the heels of a separate report that said consumer spending rose a better-than-expected 0.4 percent in June.
``Consumers are clearly becoming more concerned about the economy,'' said Mark Vitner, an economist at First Union Corp. ``The biggest issue is probably concerns about their jobs because of all the layoffs we've seen in the news lately.''
The unemployment rate has climbed from 3.9 percent in October to 4.5 percent in June, when businesses eliminated 114,000 jobs.
Many economists are predicting the July jobless rate will rise to 4.7 percent and that another 38,000 jobs will be cut. The government will release the employment report Friday.
``Consumers and businesses had viewed the current slowdown as nothing more than a bump in the road,'' Vitner said. ``Now people are concerned it's a little more than that.''
Still the markets shrugged off the consumer confidence numbers, with the Dow Jones industrial average up 171 points to 10,573 and the Nasdaq composite index up 36 points to 2,053 in late morning trading.
The Conference Board index, based on a monthly survey of some 5,000 U.S. households, is considered a key indicator 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.
Consumers have appeared relatively undaunted by weak corporate earnings, massive layoffs, slumping financial markets and anemic growth that have hobbled the economy since the second half of last year.
Despite the July numbers, Lynn Franco, director of the Conference Board's Consumer Research Center, said the reading reflected cautious optimism among consumers that the economy will rebound later this year.
Consumers also felt worse about their present economic situation, though Franco said the data still suggests that consumer spending will remain strong in the face of the deteriorating labor market.
Analysts are expecting another boost as checks of $300 and $600 begin arriving in the mail over the next several weeks, part of the government's tax rebate program.
Consumers' wallets have been open in recent months, helping keep the U.S. economy from sinking into a recession. The Commerce Department said Tuesday that consumer spending rose 0.4 percent in June, following a 0.3 percent rise in May.
Americans' incomes, which include wages, interest and government benefits, rose by a solid 0.3 percent, after a 0.2 percent increase in May.
The rise in spending occurred even as Americans were becoming less upbeat about current economic conditions, the Conference Board said.
Those rating conditions as bad rose to 14.4 percent in July, up from 12.6 percent in June, while consumers who described conditions as good dipped to 28.3 percent in July from 28.9 percent in June.
Meanwhile, those claiming jobs were ``hard to get'' held steady at 13.9 percent. Those who said jobs were plentiful fell to 35.8 percent from 38.3 percent.
In addition, 14.9 percent of consumers expect more jobs to become available in the next six months, down from 15.6 percent in June.