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Consumer confidence plunges in September
AP Business WriterNEW YORK (AP) -- Consumer confidence plunged in September to its lowest point since early 1996 as this month's terrorist attacks added to Americans' concerns about the already frail U.S. economy, the Conference Board said Tuesday.
The New York-based business group said its Consumer Confidence Index sank to 97.6 from a revised 114.0 in August -- the largest monthly point drop since the Persian Gulf War.
The figure is based on data collected both before and after the terrorist attacks on Washington and New York.
The Conference Board said in a statement that "while survey results conducted before and after the terrorist attacks on September 11 differed slightly, there was no reversal in the downward trend of the index."
Mark Zandi, the chief economist at Economy.com, questioned that interpretation.
"When all is said and done, I'm sure the attack going to be shown undermining confidence," Zandi said. "A bunker mentality is descending on consumers and investors -- everyone is battening down the hatches."
Markets moved higher following the release of the report, with the Dow Jones industrial average up 41 points to 8,645 and the Nasdaq composite index up 12 points to 1,511.
The slide, the largest monthly point drop since a 23-point plummet in October 1990, when the Persian Gulf War approached, throws even more support behind many economists' predictions that the strikes would tip the already battered U.S. economy into a recession.
"The economy faces tougher times ahead," said Lynn Franco, director of the Conference Board's Consumer Research Center. "While consumers have managed to keep the U.S. out of a recession for several years now, that soon may no longer be the case."
The index, based on a monthly survey of some 5,000 U.S. households, is closely watched because consumer confidence drives consumer spending, which accounts for about two-thirds of the nation's economic activity. The index compares results with its base year, 1985, when it stood at 100.
The last time it was this low was in January 1996, when it stood at 88.4.
The announcement of tens of thousands of layoffs in the airline industry and uncertainty about the government's response to the attacks have deepened consumers' worries about their jobs, economists said.
In fact, the board report found that the percentage of consumers claiming jobs were "hard to get" climbed to 18.5 percent in September from 16 percent in August. As a result, they're less inclined to open their wallets.
"We do have to fear fear itself. It matters. It affects consumer spending," said Bill Cheney, chief economist at John Hancock Financial Services. "If people aren't confident, people don't spend and the economy is damaged by that."
In addition, the attacks have simply saddened many consumers, sapping their urge to shop, he said.
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Conference Board: http://www.conferenceboard.org