Consumers aren’t confident

  • Tuesday, September 25, 2001 9:00pm
  • Business

Associated Press

NEW YORK — Growing anxiety about jobs and uncertainty arising from this month’s terrorist attacks pushed consumer confidence in September to its lowest level in nearly six years.

The Conference Board, a New York-based business group, on Tuesday reported its Consumer Confidence Index plunged to 97.6 from a revised 114 in August. The slide is the largest monthly point drop since it fell 23 points in October 1990, a few months after Iraq invaded Kuwait to spark the Persian Gulf War.

The latest figure is based on data collected both before and after Sept. 11, when hijackers crashed three commercial jetliners into the World Trade Center and the Pentagon.

But the Conference Board said that the difference in the data collected before and after that date was insignificant and that the downward trend was already in place.

"(The index) would have fallen this far even without the attacks," said Lynn Franco, director of the Conference Board’s Consumer Research Center.

Other analysts disagreed.

"When all is said and done, I’m sure the attack is going to be shown undermining confidence," said Mark Zandi, chief economist at Economy.com. "A bunker mentality is descending on consumers and investors — everyone is battening down the hatches."

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 to its base year, 1985, when it stood at 100.

Until the attacks, consumer spending remained one of the pillars of the struggling economy. But the erosion in confidence in September appeared to assure it would slip into a recession.

"While consumers have managed to keep the United States out of a recession for several years now, that soon may no longer be the case," Franco said.

Zandi agreed. "I think this is proof positive we’re in a recession."

The last time consumer confidence fell below 97.6 came in January 1996, when the index stood at 88.4.

The announcement of tens of thousands of layoffs in the airline industry following the attacks and uncertainty about the government’s response have deepened consumers’ worries about their jobs, economists said.

"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."

The Conference Board reported 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, Franco said.

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 This material may not be published, broadcast, rewritten, or redistributed.

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