Consumer sentiment hits 9-year low
By Rex Nutting, CBS.MarketWatch.com
Last Update: 10:11 AM ET Oct 11, 2002
ANN ARBOR, Mich. (CBS.MW) - Faced with an historic bear market and tepid job growth, consumers are as gloomy as they've been for nine years.
The University of Michigan's consumer sentiment index sank to a 10-year low of 80.4 in early October from 86.2 in September, according to media reports. It's the lowest since September 1993.
Economists were expecting a smaller decline to about 85.7 in October.
The index's previous cyclical bottom was in October 2001, when the index plunged nearly 10 points to 81.8 after the terror attacks. Sentiment improved fitfully for the next eight months before falling back in the past five months.
The stock market largely ignored the report, with the Dow Jones Industrial Average up nearly 200 points, boosted by encouraging words from General Electric, the nation's largest company.
The current conditions index fell to 92.9 from 95.8, a 10-year low.
The expectations index fell to 72.4 from 79.9, a nine-year low.
Consumer attitudes closely track the unemployment rate and the stock market. Although they do not necessarily forecast consumer spending, economists watch the numbers and the detailed surveys behind them for clues about the mood of the country.
Earlier Friday, the Commerce Department estimated that retail sales fell 1.2 percent in September as auto sales plunged. Excluding autos, sales managed a tepid 0.1 percent advance.
The consumer index is "a reality check after the not-as-bad-as-they-could-have-been retail sales numbers," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
The Federal Reserve, while publicly optimistic, "will undoubtedly keep a very close eye on the data and anecdotal reports regarding consumer demand in the weeks leading up to the Nov. 6 FOMC meeting," said Steve Stanley, an economist at RBS Greenwich Capital Markets.
Drew Matus, an economist at Lehman Brothers, suggested that the survey reflected the "post-Sept. 11lows for the equity market so, if the equity market rally continues, the drop would likely be reversed over the next month or so."
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