NEW YORK – Confidence in the U.S. economy fell to a record low in September as the destruction caused by Hurricane Katrina made consumers pessimistic about the economy and personal finances, according to a survey released on Tuesday.
Investor's Business Daily (search) and TechnoMetrica Market Intelligence (search) said their economic optimism index fell 9.7 points to 41.2 from August's 50.9. A reading below 50 indicates pessimism.
"Hurricane Katrina (search) wasn't done when she unleashed her fury on America's Gulf Coast, wiping out New Orleans and devastating other coastal areas. She also dealt a severe body blow to consumer confidence across the board," Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner, said in a release.
All three of the index's components fell in September to reach new lows. While the personal financial outlook measure was still in optimistic territory at 50.8, it was down 6.9 points from 57.7 in August.
Confidence in the federal government's economic policies slipped to 44.0 from 49.6 while confidence in the economic prospects in the next six months fell the most of the three components, slumping 16.3 points to 29.0.
"We'll be interested to see if there's a bounce back next month, as there was in October 2001 after the 9/11 attacks," Terry Jones, associate editor of Investor's Business Daily, said in the release.
"Given the media's focus on Katrina's destruction and on government's poor performance in the hurricane's aftermath, it's not surprising that confidence would fall. But, with aid now flowing and fatalities fewer than expected, that could reverse."
Release of the IBD/TIPP consumer confidence index precedes the closely watched University of Michigan consumer sentiment report, which is due to be released on Friday.