Published December 31, 2002
NEW YORK – U.S. consumer confidence suffered a surprise slump in December as weak job prospects soured spirits, compounding the gloomy picture for retailers in the key holiday shopping season, a report said Tuesday.
The Consumer Confidence Index dropped to 80.3 in December from a revised 84.9 in November, the Conference Board, a private business research group, said. That was far below analysts' forecasts for an improvement to 85.5.
The index has declined for six of the past seven months, and the decline in December took the index back near the nine-year low plumbed in October of 79.6.
"The major factor dampening consumers' spirits has been the rising unemployment rate and the discouraging job outlook," said Lynn Franco, director of the Conference Board's Consumer Research Center.
"Weak retail sales over the holidays clearly reflect the current mood of consumers. Until there is an improvement in labor market conditions, there is not likely to be a significant upturn in confidence," Franco said.
The dollar slipped and U.S. Treasuries firmed slightly after the weaker-than-expected report.
Consumer confidence is closely watched by economists and businesses for clues about spending, which makes up two-thirds of the economy's punch. Holiday sales were lackluster in the lead-up to Christmas as consumers reined in spending, with the unemployment rate jumping to an eight-year high and talk of war dominating the news.
"This was not good news for the economy," said Gregory Miller, chief economist at Suntrust Banks in Atlanta.
JOBS HARD TO GET
The Present Situation Index, a measure of consumers' current attitudes about the economy and their finances, plunged to 69.9 in December from an upwardly revised 78.3 in November.
It was the lowest level for the index since January 1994, when it was 67.6, the Conference Board said.
But the Expectations Index, a gauge of consumers' six-month outlook, did not fare as badly, slipping to 87.2 from 89.3 the previous month.
"That is the silver lining, and it raises no fears of a double-dip recession. These are some of the patterns you see in a recovery," Franco told Reuters.
In a reflection of the dour outlook in the labor market, consumers reporting "jobs hard to get" rose to 29.8 percent from 27.3 percent, and people expecting fewer jobs in the coming months rose to 20.2 percent from 18.8 percent.
Employment jumped to 6 percent in November, and firms have been reluctant all year to add workers amid uncertainty about the economic recovery.
Businesses and consumers are also worried about the economic impact of a likely war with Iraq. Oil prices have recently jumped to two-year highs, which will eventually weigh on household spending as fuel costs increase.
The economy is still working its way through a soft spot that has lasted since late summer, and consumers waiting for bargains have been frugal in their holiday shopping. Several top U.S. chain stores have given a gloomy view of their post-Christmas sales.
And figures on Tuesday suggested that last-minute shopping failed to make up for a soft start to the retail season, according to Instinent Research, which said sales at major U.S. chain stores rose just 0.7 percent in the four weeks ended Dec. 28 compared with the same period last month.