NEW YORK – Consumer confidence fell sharply in July to its lowest level in five months, undermined by falling stock prices and worries about jobs, a private research group said Tuesday.
The New York-based Conference Board said its Consumer Confidence Index fell to 97.1 from a revised 106.3 in June. Analysts had been expecting a reading of 101.5.
The industry group's index, based on a monthly survey of some 5,000 U.S. households, is closely watched because consumer confidence drives consumer spending, which accounts for about two-thirds of the nation's economic activity.
"The erosion in consumer confidence represents a significant deterioration in consumer attitudes" said Lynn Franco, director of The Conference Board's Consumer Research Center. "The continued decline in the value of stock market portfolios, coupled with ongoing reports of corporate scandals, have taken a toll on consumer confidence."
The index compares results to its base year, 1985, when it stood at 100. July's figure is the lowest since February, when consumer confidence fell to 95.0 during congressional hearings investigating the Enron scandal.
From a historical context, the July index is not alarming, but a "continued slide could very well jeopardize the economic recovery," the Conference Board said in a release.
Consumers' view of current economic conditions declined in July, a sign that they may be ready to curb spending without incentives to do so, the Board said.