Consumer confidence unexpectedly declines in November, hitting seven-year low

  • LISI De BOURBON / Associated Press
  • Monday, November 26, 2001 9:00pm
  • Business

By LISI De BOURBON

Associated Press

NEW YORK – Consumer confidence unexpectedly fell to a 7 1/2-year low in November, suggesting a less-than-rosy holiday shopping season as Americans continue to worry about layoffs and their buying power.

The New York-based Conference Board said Tuesday that its Consumer Confidence Index fell for the fifth consecutive month in November to 82.2 from a revised 85.3 in October. Analysts were expecting an increase to 86.5.

“Consumers are still depressed by the struggling job market, the rise in unemployment and lost income they’re facing,” said Mark Zandi, chief economist at Economy.com. “But I think the worst of the slide in confidence may be over.”

Nonetheless, he and other analysts said the dip in confidence could translate into lackluster retail sales in the coming weeks. Holiday sales account for about 24 percent of retailers’ annual revenue.

Lynn Franco, director of the Conference Board’s Consumer Research Center, said a turnaround in confidence was unlikely before year’s end.

The index, based on a monthly survey of some 5,000 U.S. households, is closely watched because consumer confidence drives spending, which accounts for about two-thirds of the nation’s economic activity.

The index compares results to its base year, 1985, when it stood at 100. The November figure is the lowest since February 1994, when it reached 79.9.

Retailers offered deep discounts and other specials to lure customers over Thanksgiving weekend, the traditional start of the holiday buying season. Early results barely met merchants’ modest expectations – except for Wal-Mart and some other discount chains.

Employers have slashed hundreds of thousands of jobs since hijackers plowed commercial jets into the World Trade Center and the Pentagon on Sept. 11, and companies had started eliminating jobs well before the attacks in response to the slowing U.S. economy.

In recent weeks, stock prices had started to make a comeback following U.S. military victories in Afghanistan and an optimism that the U.S. recession – officially confirmed Monday by the National Bureau of Economic Research – would be short-lived.

But the Conference Board said consumers’ assessment of the current economic climate is more pessimistic than last month. Consumers rating current business conditions as bad rose to 21.4 percent in November from 20.7 percent in October, while those who thought conditions were good declined to 16.4 percent from 18.6 percent.

However, the board said consumers were slightly more optimistic about economic prospects for the next six months.

In a separate report, the National Association of Realtors said sales of previously owned homes increased 5.5 percent in October, reflecting the housing market’s continued strong demand. The group said the results may reflect a number of transactions that were postponed in September, when existing-home sales plunged 11.6 percent.

The Conference Board is a nonprofit research and business group, with more than 2,700 corporate and other members around the world.

___

On the Net:

http://www.conferenceboard.org

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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