February Consumer Confidence Index Slips
By Ross Finley
Reuters
NEW YORK (Feb. 26) - Consumer confidence fell in February as persistent weakness in the labor markets eroded growing optimism about the economy, a report showed on Tuesday, suggesting a rebound from recession may be tepid.
Analysts said the pullback -- which snapped two months of gains -- was partly linked to accounting concerns on Wall Street related to bankrupt energy trader Enron Corp. that have hurt stock prices and damaged investor sentiment.
The Conference Board, a New York-based private research group, said its closely watched index of consumer confidence fell to 94.1, the lowest level since November and below analysts' forecasts of a dip to 96.8.
Analysts closely watch consumer confidence because it can give clues on the future direction of consumer spending, which accounts for two-thirds of the economy.
The data were released a day before Federal Reserve Chairman Alan Greenspan was scheduled to testify to Congress on the economy. Analysts expect Greenspan to sound more upbeat on the economy's prospects for recovery.
''The latest report is telling you that the recovery is not off to the races,'' said Carey Leahey, senior U.S. economist at Deutsche Banc Alex. Brown in New York.
The Conference Board revised upward its January reading, to 97.8 from 97.3, and said the February drop will not dent the robust pace of spending, which so far has kept the recession that began in March shallow compared with past downturns.
''While confidence has weakened from January's level, both components of the Index still point to healthy consumer spending in the months ahead,'' said Lynn Franco, director of the Conference Board's Consumer Research Center. ''The consumer will continue to provide solid spending support as the economy moves into recovery.''
The Present Situation Index, which measures Americans' views of the economy right now, fell to 94.8 in February from 98.1. That was its lowest level since April 1997. The Expectations Index, a gauge of consumers' six-month outlook, fell to 93.6 in February from 97.6 in January.
U.S. stock indexes erased their early gains and turned negative after the report was released, while Treasury securities rose off their lows for the session.
The dip in confidence comes despite recent evidence that American workers' spending habits have held strong in the face of recession.
January retail sales rose 1.2 percent excluding automobiles, the government said earlier this month, far outpacing expectations. Data released on Monday showed existing homes sales zoomed at a record pace last month, surging more than 16 percent.
On Tuesday Federated Department Stores Inc., the parent of department stores Bloomingdale's and Macy's, reported a fourth-quarter net loss but raised its 2002 outlook.
On Monday, Lowe's Cos., the world's second-largest home improvement retailer, said its fourth-quarter profit rose and fiscal 2002 earnings would top current estimates.
Two separate reports on Tuesday showed chain store sales rose compared with year-ago levels. Sales rose 3.5 percent in the week ended Feb. 23 compared with the same week one year ago, Instinet said in its Redbook Retail Sales Average. Sales rose 5.1 percent from year-ago levels, the Bank of Tokyo-Mitsubishi/UBS Warburg said in a joint report.
Meanwhile, evidence that the jobs market has stabilized after the rapid deterioration following the Sept. 11 attacks has mounted. The jobless rate fell to 5.6 percent in January from 5.8 percent and the economy shed 89,000 jobs, fewer than in the prior month.
The pace of weekly first-time unemployment claims has also eased from peaks of over 500,000 after Sept. 11, holding below 400,000 for the past seven weeks.
But Americans still view the current job situation as weak, the Conference Board said, with 22.8 percent saying jobs are ''hard to get,'' up from 22.5 percent in January. That was its highest level since June 1996. Those reporting that jobs were plentiful fell to 17.8 percent from 18.4 percent.
Economists say that a rise in the jobs ''hard to get'' category is usually followed by a similar increase in the unemployment rate.
The consumer confidence index is compiled from a mail-in sample of about 5,000 U.S. households. A separate survey conducted by the University of Michigan based on telephone interviews slipped in early February after rising for four straight months, in part because of stock market woes.
Reut11:42 02-26-02
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