NEW YORK – Consumer confidence worsened in October after staging a dramatic fall last month as hurricanes, high gasoline prices and uncertainty over jobs continued to weigh, the Conference Board said Tuesday.
The Conference Board (search) said its index of consumer sentiment fell in October to 85.0 from a September reading of 87.5, which was revised upward from 86.6. A Reuters poll of economists had produced a median forecast for a rise in October to 88.1
"Much of the recent decline in confidence over the past two months can be attributed to the recent hurricanes, (gas) pump shock and a weakening labor market," said Lynn Franco, director of the Conference Board Consumer Research Center.
The business research group's present situation index fell to 108.2 from an upwardly-revised 110.4, while the expectations component dropped to 69.5 from an upwardly revised 72.3.
"We had expected a rebound. Gasoline prices are down a lot, so that is good news, but they are still very high and that may be what is weighing on people's minds at this point," said Kurt Karl, head of economic research at Swiss RE in New York.
Sentiment indexes have traditionally been seen as a gauge of U.S. consumer spending (search), which accounts for roughly two-thirds of overall economic activity.
But the low interest rate environment of recent years has seen sentiment and spending de-couple as consumers have continued to buy new cars and houses in spite of their concern over the economic outlook.
However, the drop in the consumers' assessment of current conditions in the survey indicated that spending could suffer.
"This degree of pessimism, in conjunction with the anticipation of much higher home heating bills this winter, may take some cheer out of the upcoming holiday season," the Conference Board's Franco said.
"In order to avoid a blue Christmas, retailers will need to lure shoppers with sales and discounts," she added.
Consumers' view of the labor market darkened this month as well, according to the Conference Board.
The survey's "jobs hard to get" index edged up to 25.3 in October, from 25.0 in September, making this the highest reading since December 2004.
The short-term outlook was also less favorable.
Consumers who were expecting business conditions to worsen over the next six months fell to 18.4 percent in October from 19.6 percent in September, while those expecting conditions to improve dropped to 14.0 percent from 15.4 percent.