NEW YORK - With Christmas only about eight weeks away, shoppers are feeling more forlorn about the economy than they have since hurricanes Katrina and Rita battered the Gulf Coast two years ago.
The New York-based Conference Board said Tuesday that its Consumer Confidence Index fell to 95.6 from a revised 99.5 in September. It was the lowest reading since 85.2 in October 2005 when gas and oil prices soared after the hurricanes deluged New Orleans and shut down a large chunk of the nation’s oil refineries. Analysts had expected a reading of 99.5 Tuesday.
For retailers, the consumer confidence report, which showed its third monthly decline in a row, heightens worries that the holiday shopping season will be challenging after a disappointing fall. For investors, it raised concerns that consumers’ growing wariness was another sign that the economy may be slowing too much. Consumer spending accounts for two-thirds of U.S. economic activity.
The report helped nudge stocks lower as Wall Street waited warily for a decision on interest rate policy from the Federal Reserve, which met Tuesday and is meeting again today. The Dow Jones industrial average dropped 55.84, or 0.40 percent, to 13,814.42.
Souring confidence is “certainly not what retailers want to see going into the holiday season,” said Wachovia Corp. economist Mark Vitner. He added that consumers have more hurdles going into the season than even two years ago.
The Present Situation Index, which measures how shoppers feel now about the economy, declined to 118.8 in October from 121.2 in the prior month. The Expectations Index, which measures shoppers’ outlook over the next six months, declined to 80.1 from 85.0.
Shoppers are contending with a slew of problems: higher food and gas prices, a deepening housing slump and tighter credit, among them. A report on U.S. home prices Tuesday offered little hope that housing prices will recover soon. According to the S&P/Case-Shiller index, home prices fell nationwide in August for the eighth month.
And while the Federal Reserve is expected to cut interest rates today to soften the impact of the housing woes, economists say the move is probably too late for the holiday season, which accounts for up to 40 percent of retailers’ annual revenue.
“Further weakening in business conditions has, yet again, tempered consumers’ assessment of current-day conditions and may very well be a prelude to lackluster job growth in the months ahead,” said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. “In addition, consumers are growing more pessimistic about the short-term future and their rather bleak outlook suggests a less than stellar ending to this year.
For those who watch the economy, the big concern is that a slowing housing market and rising fuel prices will undermine what has been, until now, a healthy jobs market, Vitner said.The Labor Department is expected to show an increase of 80,000 jobs in October when it releases its monthly report on Friday.
Unemployment is expected to remain steady at 4.7 percent. Vitner noted that already layoffs are starting to rise.The Consumer Confidence report — derived from responses through Oct. 23 — showed a weakening of confidence in the job market.