Feb. Consumer Confidence Slumps
Tue February 24, 2004 10:33 AM ET
(Page 1 of 2)
By Daniel Bases
NEW YORK (Reuters) - U.S. consumer confidence fell unexpectedly hard in
February as Americans grew disenchanted with the economy, mainly
because of a dearth of new jobs, a report published on Tuesday said.
The Conference Board, a private research firm, said its index of consumer
confidence dropped to 87.3 in February from a downwardly revised 96.4 in
January. Economists had forecast a drop to 92.5. February's reading was the
lowest since October.
"People are not happy. The big problem is the jobs situation. The lack of jobs
has people scared," said David Wyss, chief economist at Standard & Poor's
in New York.
"When people are scared they don't spend money, and the consumer has
been the mainstay of this economy. At the same time, peoples' spending
tends to be more influenced by their income than by their confidence," he
added.
U.S. stock indexes and the dollar fell sharply while Treasuries rallied on the
grim news because it bolsters the case for the Federal Reserve to leave
benchmark U.S. interest rates steady at 1 percent, their lowest level since
1958.
"Consumers began the year on a high note, but their optimism has quickly
given way to caution," said Lynn Franco, director of research at the
Conference Board, adding "Consumers remain disheartened with current
economic conditions, and at the core of their disenchantment is the labor
market."
The number of consumers saying jobs were hard to get rose in February to
32.1 percent, up from January's 31.6 percent.
Consumers' view of the future also deteriorated, taking the expectations index
down to 96.8 from 107.8, while the present situation index declined to 73.1
from 79.4.
"This is disappointing given the recent rally in the equity markets and
resumption of job growth in the U.S. It is quite surprising to see such a sharp
pullback in confidence. Respondents are still finding increased difficulty in getting jobs and it
suggests some risk to the economic outlook for the United States," said Sal Guatieri, senior
economist at BMO Financial Group in Toronto.
"It is possible that recent terrorism threats might be weighing on confidence," Guatieri added.
Earlier on Tuesday mixed reports on weekly consumer spending habits were released.
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