Buyers' index fall is worst in years
NEW YORK -- Consumer confidence plunged in February to its lowest level in nearly 10 years, dragged down by the prospect of war with Iraq.
The Consumer Confidence Index fell almost 15 points to 64.0 -- its lowest reading since October 1993 -- from 78.8 in January, the Conference Board reported Tuesday. Analysts were predicting a reading of 77.0.
"On all fronts, it's jitters about the upcoming war with Iraq," said Josh Feinman, chief economist for Deutsche Asset Management in New York.
The Dow Jones industrials fell as much as 138 points to a fresh four-year low before staging a late-day rally on bargain hunting. The Dow rose 51.26 points to close at 7,909.50, while the Nasdaq composite index gained 6.6 points at 1,328.98.
Economists closely track consumer confidence because consumer spending accounts for two-thirds of U.S. economic activity.
"The gloom is deepening," said economist Oscar Gonzalez of John Hancock Financial Services in Boston. "A stagnant job market, rising oil prices, slumping stock prices and the threat of war with Iraq, all of these seem to be pressing down heavily on consumers."
Home buying up
Still, Americans continued their home-buying frenzy last month as the housing market remained one of the few bright spots in the economy.
Sales of previously owned homes surged in January to their best month ever, at a seasonally adjusted annual rate of 6.09 million, the National Association of Realtors said Tuesday. That represented a strong 3 percent increase from December and defied analysts' expectations that home sales would dip slightly to a rate of 5.80 million.
"It's mortgage rates," said David Lereah, the association's chief economist. He said low mortgage rates continue to be "the fuel for the housing engine."
The average, fixed-rate 30-year mortgage dropped to 5.92 percent in January -- the lowest level since the early 1960s. The average in December was 6.05 percent.
Low mortgage rates pushed sales of both new and existing homes to record levels last year. And, last week, the government reported that construction of new homes and apartments posted a 16-year high in January.
Economists say potential home buyers see houses as an attractive investment compared with the turbulent stock market.
The national median home price in January was $160,400, up 6.7 percent from the same month a year ago.
With the United States moving closer to war, the Consumer Confidence Index was down for the third straight month in February, as those surveyed expressed more worries about the job outlook and their incomes.
The Present Situation Index, which gauges consumers' sentiment about current business conditions, dropped to 61.6 in February from 75.3 in January. The latest time the index fell to such lows was in November 1993, when it slumped to 59.2.
The Expectations Index, intended to measure feelings about the next six months, fell more than 15.5 points to 65.6, hitting an 11-year low. It stood at 81.1 only a month ago.