October 30, 2002
Consumer Confidence at 9-Year Low, a Warning on Economy
n a report that was seen as a warning signal for the economy, the Conference Board said yesterday that consumer confidence in October plunged to a nine-year low.
The board's index of consumer confidence, which measures current and future expectations, fell to 79.4 from 93.7 in September. It was the biggest one-month drop since October 1990. And it was the lowest reading on consumer confidence since November 1993, when the index stood at 71.9 and was rising as the effects of a recession tapered off.
The data also showed expectations on conditions six months from now to be sharply lower.
The report startled Wall Street and initially prompted sharp selling of stocks, though later in the session they recouped much of their losses.
In advance of yesterday's data, most economists expected the confidence reading to be around 90.
"This is bad, but it is just one month," said Ken Goldstein, an economist at the Conference Board, which is based in New York. "It has the potential to bounce back."
Nonetheless, Mr. Goldstein acknowledged that the October reading put the index "very close" to recession levels. "This is not good news for the White House," he said.
The confidence figure is the first of several important economic reports this week. Analysts said coming data on third-quarter economic growth and unemployment in October were likely to reinforce the notion that the recovery was losing steam. With less than a week left before tightly contested midterm elections, these economic reports could influence the choices of some voters.
Norman Ornstein, a resident scholar at the American Enterprise Institute in Washington, said: "If we had gotten the consumer confidence number three months ago or even a month ago, it would not have mattered because people weren't paying attention. Now they are."
He continued: `We have an election that will be decided at the margin of the margin. You don't need a major tide to turn Senate races from one side to another. And if a sour mood is what is prevailing, the odds are that at the margin it will hurt the `in' party."
Referring to President Bush's political strategist, Mr. Ornstein said, "If I were Karl Rove, this is the last thing I would want to see happen."
According to the Conference Board survey, consumer sentiment about current conditions fell for the fifth consecutive month. What made the overall decline so significant, Mr. Goldstein said, was that expectations for conditions six months from now fell for the first time, to 80.7 in October from 97 in September.
"All of this is happening three to four weeks before the start of the holiday shopping season," he said. "Absent some sort of big change, this will likely have an impact on Christmas sales."