Consumer confidence fell in July to lowest level in five months

NEW YORK -- Consumer confidence fell sharply in July to its lowest level in five months, undermined by a steep decline in stock prices and worries about jobs, a private research group said Tuesday.

The New York-based Conference Board said its Consumer Confidence Index fell to 97.1 from a revised 106.3 in June. Analysts had been expecting a reading of 101.5.

The industry group's 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 erosion in consumer confidence represents a significant deterioration in consumer attitudes" said Lynn Franco, director of The Conference Board's Consumer Research Center. "The continued decline in the value of stock market portfolios, coupled with ongoing reports of corporate scandals, have taken a toll on consumer confidence."

July's figure is the lowest since February, when consumer confidence fell to 95.0 during congressional hearings investigating the Enron scandal.

From a historical context, the July index is not alarming, but a "continued slide could very well jeopardize the economic recovery," the Conference Board said in a release.

The report showed a sharp decline in consumers' confidence about current economic conditions, which could indicate that consumers are ready to cut their spending.

Economists said the figures show how much the drop in stocks has worried consumers, but questioned how the long-term impact of that change in mood.

"This shows that consumers were definitely shaken by the stock market sell-off," said Mark Vitner, economist at Wachovia Securities in Charlotte, N.C. "The rebound probably came too late to help out the confidence numbers."

He noted that while consumer confidence seems shaken, the number reporting plans to buy cars or houses actually rose, indicating that consumers aren't reining in spending.

"It's hard for me to believe that consumers are sitting on their wallets," he said.

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