Consumer confidence drops sharply
NEW YORK (AP) - January 29, 2008 The New York-based Conference Board said that its Consumer
Confidence Index dropped to 87.9 in January from a revised 90.6 in
December. That put it back to about where it was in November, when
it registered 87.8.
The January reading was just a tad below the 88 expected by Wall
Street analysts, according to Thomson/IFR.
The index, which measures how consumers feel now about the
economy, has been weakening since July, suggesting that wary
consumers could retrench financially. Any cut back on consumer
spending could weaken the economy further.
January's data was collected before the Federal Reserve on Jan.
22 cut its short-term interest rate target three-quarters of a
percentage point to 3.5 percent to boost the economy.
Two days later, the White House and Congress announced a joint
agreement to work on an economic stimulus program that's expected
to include tax rebates for consumers.
The Fed began a two-day meeting on Tuesday, and many in the
market expect an additional rate cut of at least a quarter of a
point.
The market marked time in advance of Fed's Wednesday
announcement, with the Dow Jones industrial average up 47.15, or
0.4 percent, at 12,431.04 in midmorning trading and the Standard &
Poor's 500 index up 3.87, or 0.3 percent, at 1,357.83. The Nasdaq
composite fell 4.35, or 0.2 percent, to 2,345.56.
Robert B. MacIntosh, chief economist with Eaton Vance Corp., the
Boston-based investment management firm, said he was worried that
consumers were overreacting to media reports and politicians'
statements suggesting the economy was heading into a severe
recession.
"It's not strong, but they make it sound like it's 1932 all
over again, and I don't think that's the case," MacIntosh said, in
a reference to the Great Depression.
MacIntosh expects the economy to be weak through the first half
of the year, growing at an annual rate of about 1 percent, with
unemployment creeping up.
"It won't feel great, but I don't think we're going to have a
recession," he said.
Adding to the mixed reports about the economy, the Commerce
Department reported Tuesday that orders to factories for big-ticket
manufactured goods soared in December by the largest amount in five
months, welcome news for an economy buffeted by talk of recession.
The 5.2 percent increase in orders was a surprise finish for the
manufacturing sector at year's end - a segment of the economy
considered to have had a poor year.
Lynn Franco, director of The Conference Board Consumer Research
Center, said in a statement that the consumer confidence survey -
which is based on a sample of 5,000 U.S. households - indicated
that consumers in January appeared more pessimistic about the
economy.
"Consumers' appraisal of current business conditions is
becoming more negative and their assessment of the job market,
while slightly less negative than in December, is more negative
than a year ago," Franco said.
She added: "Looking ahead, consumers are quite downbeat about
the short-term future, and a greater proportion expect business
conditions and employment to deteriorate further in the months
ahead."
The Conference Board's expectations index, which measures
consumers' outlook over the next six months, declined to 69.6 in
January from 75.8 the month before. The present situation index
rose to 115.3 from 112.9 in December.
Franco said that the percentage of consumers anticipating an
improvement in their earnings has declined, "and could potentially
impact spending decisions."
Many retailers reported mediocre Christmas shopping, and
national chain store sales were expected to show further decline in
January.
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