Worries about jobs and the drumbeat of war with Iraq weighed on American consumers' spirits in January, but not as much as many analysts had feared, tempering worries about a second U.S. recession.
The Consumer Confidence Index fell to a 9-year low of 79.0 in January from a revised 80.7 in December, the Conference Board a private business research group, said in a release.
While the index has now fallen for seven of the past eight months, the drop was more moderate than average forecasts for 78.1.
The drop in confidence, which comes as U.S. troops gather in the Gulf for a potential war with Iraq, was driven entirely by a sharp fall in consumers' expectations for the next six months. By contrast, most consumers reported their present situation had actually improved in the past month.
"It's fear about war and the impact on the economy," said Kevin Logan, senior economist at investment bank Dresdner Kleinwort Wasserstein. "People are concerned about the price of oil and they're worried about what it will do to the economy."
Consumer confidence is closely watched by economists and businesses for clues about spending, which makes up two-thirds of the U.S. economy. Retailers just passed through one the worst holiday shopping seasons in 3 decades and all eyes are now on the consumer as businesses continue to shed workers and hold off on capital spending plans.
The Present Situation Index, a measure of consumers' current attitudes about the economy and their finances right now, rose to 75.4 in January from a revised 69.6 in December. But the Expectations Index, a gauge of consumers' six-month outlook, fell nearly seven points to 81.4 from a revised 88.1.
"With the threat of war looming, consumers have grown increasingly cautious about the short-term outlook," said Lynn Franco, director of the Conference Board's Consumer Research Center, who added that the index level is a reflection of "lackluster economic activity." (Reuters)
Back to Breaking News