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Consumer confidence fell seven month low Original Source Link: (May no longer be active)
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U.S. Consumer Confidence Fell to a Seven-Month Low (Update4) Listen
Oct. 26 (Bloomberg) -- U.S. consumer confidence fell for a third straight month in October, suggesting growing voter discontent with the economy a week before President George W. Bush seeks re-election.
The Conference Board's consumer confidence index dropped to 92.8, the lowest since March, from a revised 96.7 in September, down from the previous estimate. Americans' assessments of the current economy and their outlook for the next six months fell.
Since the survey began in 1967, no president except Ronald Reagan has won re-election with the confidence index below 100 on Election Day. Three incumbents have lost when readings were below 90.
``It's not good news for Bush,'' said Delos Smith, a Conference Board economist. ``He can still win, but this is not a good omen. People are nervous about their jobs and incomes.''
Job growth has slowed since June and oil prices rose to a record yesterday. The median forecast of 65 economists surveyed by Bloomberg News was for confidence to fall to 94 from an initial estimate of 96.8. Forecasts ranged from 85.5 to 97.
The Conference Board, a New York-based research group, surveys 5,000 households on general economic conditions, people's employment prospects, and spending plans.
The confidence index is below the 115.7 reading when Bush took office in January 2001. Slowing job growth and rising oil prices in recent months have pushed confidence lower since the measure reached a two-year high of 105.7 in July.
Jobs and Energy
``Voters understand that there's more work to do to strengthen the economy and having American's to keep more of their hard earned money is a way to foster economic growth,'' said Scott Stanzel, a Bush campaign spokesman. ``The surest way for consumers to have less money in their pocket is to enact John Kerry's policies of higher taxes.''
The economy added an average of 103,000 jobs a month since June after gaining 204,000 a month in the first half. Crude oil prices, which rose to an intra-day record $55.67 yesterday, are up 80 percent over the past year, pushing gasoline and heating oil costs higher. That threatens to erode consumer spending and prompt companies to be more cautious about hiring.
``High energy and lower consumer confidence will lower the rate of growth,'' Lew Frankfort, chief executive of Coach, Inc., the largest U.S. seller of luxury leather goods, said in an interview.
The component of the Conference Board index tracking assessments of current economic conditions fell to 94.2 from 95.3 in September.
Jobs Hard to Get
While the percentage of Americans that saw jobs as hard to get now fell to 27.8 from 28 percent, the percentage seeing business conditions as ``bad'' rose to 21.4 from 20.4.
A gauge of optimism about the economic outlook over the next six months plunged to 92 this month from 97.7 in September. Consumers said the job market and their own income prospects would worsen.
The readings are ``further evidence that the American people are not fooled by George Bush's rhetoric that the economy is strong and getting stronger,'' said John Edwards, Kerry's running mate.
The percentage that said there would be more jobs available six months from now fell to 16.5 from 17.8 in September, while 18.4 percent said their incomes would increase, down from 20 percent a month ago.
The 4 1/4 percent Treasury note maturing in August 2014 rose 1/32 to yield 3.97 percent at 11:38 a.m. in New York.
Other Readings
The decline in the Conference Board index is consistent with the Oct. 15 preliminary reading on consumer sentiment from the University of Michigan. The university's index fell to 87.5 from September's 94.2. The final Michigan reading for October will be released Oct. 29.
Most national polls, including one released today by the Los Angeles Times, show a statistical tie in the race between Bush and his Democratic challenger, Massachusetts Senator John Kerry.
``It'll be tougher for Bush to make the case'' for re- election, said Charles Gabriel, a senior political analyst at Prudential Equities LLC in Washington.
Voters are signaling their disapproval with Bush's economic policies. A majority of those surveyed by the Times, 51 percent, disapproved of the way the president is handling the economy. An Annenberg Center survey released yesterday found 41 percent said Bush's policies have made the economy worse; 34 percent said he's made the economy better.
U.S. investor optimism dropped to a 12-month low in October. The UBS Index of Investor Optimism sank to 62, its lowest since September 2003 and down from a reading of 74 last month.
Other Presidents
Bill Clinton defeated George H.W. Bush in 1992 when the gauge was 54.6. Jimmy Carter lost to Ronald Reagan in 1980 when the index was 84.2. The confidence index was 87.1 when Carter defeated Gerald Ford in 1976.
This month, the Conference Board found consumer confidence lowest in the Middle Atlantic and East North Central regions, which include the battleground states of Pennsylvania, Ohio, Wisconsin, and Michigan. Confidence is strongest in the South Atlantic region, which includes Florida.
Consumer confidence is higher under Bush than under the previous incumbents who lost, and it's well above last year's levels, when the Conference Board gauge averaged 79.8. During the record 10-year expansion from 1991 to 2001, the index averaged about 103.
``What it means is the election will be close,'' said the Conference Board's Smith. ``It'll make the Bush people very nervous.''
The drop in confidence may reflect Americans' concern about what they'll have left to spend after paying more for gasoline and heating oil. Gasoline prices reached $2.08 a gallon last week, according to the Energy Department.
Buying Plans
While studies have shown confidence indexes don't always accurately predict how consumers will behave, the three-month drop likely will mean slower ``growth in consumer spending,'' said William Hernandez, chief financial officer at PPG Industries Inc. the world's second-biggest maker of car paint, in an interview.
The Conference Board survey found the percentage of consumers planning to buy a car rose to 7.4 percent from 6.3 percent last month. The percentage planning to buy a home dropped to 3.5 from 3.9. The percentage planning to buy a major appliance fell to 27.1 percent from 29.8 percent.
Economists have trimmed fourth-quarter growth estimates, now estimating the economy will expand at a 3.8 percent annual rate after expanding at an estimated 4.3 percent pace from July through September, according to the median of economists surveyed.
To contact the reporter on this story:
Joe Richter in Washington Jrichter1@bloomberg.net.
To contact the editor responsible for this story:
Kevin Miller at kmiller@bloomberg.net.
Last Updated: October 26, 2004 11:45 EDT
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