Public’s mood on economy turns sour

Associated Press

NEW YORK— Consumer confidence skidded in July, underscoring ongoing worries about jobs and the future of the U.S. economy, though consumer spending should continue to hold up, a private research group said Tuesday.

The New York-based Conference Board said its Consumer Confidence Index fell to 116.5, down from a revised 118.9 in June. The latest reading came on the heels of a separate report that said consumer spending rose a better-than-expected 0.4 percent in June.

"Consumers are clearly becoming more concerned about the economy," said Mark Vitner, an economist at First Union Corp. "The biggest issue is probably concerns about their jobs because of all the layoffs we’ve seen in the news lately."

The unemployment rate climbed from 3.9 percent in October to 4.5 percent in June, when businesses eliminated 114,000 jobs.

Many economists are predicting the July jobless rate will rise to 4.7 percent and that another 38,000 jobs will be cut. The government will release the employment report Friday.

"Consumers and businesses had viewed the current slowdown as nothing more than a bump in the road," Vitner said. "Now people are concerned it’s a little more than that."

The Conference Board index, based on a monthly survey of some 5,000 U.S. households, is considered a key indicator because consumer spending 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.

Consumers have appeared relatively undaunted by weak corporate earnings, massive layoffs, slumping financial markets and anemic growth that have hobbled the economy since the second half of last year.

Despite the July numbers, Lynn Franco, director of the Conference Board’s Consumer Research Center, said the reading reflected cautious optimism among consumers that the economy will rebound later this year.

Consumers also felt worse about their present economic situation, though Franco said the data still suggests consumer spending will remain strong in the face of the deteriorating labor market.

Consumers’ wallets and pocketbooks have been open in recent months, helping keep the U.S. economy from sinking into a recession. The Commerce Department said Tuesday that consumer spending rose 0.4 percent in June, following a 0.3 percent rise in May.

Americans’ incomes, which include wages, interest and government benefits, rose by a solid 0.3 percent, after a 0.2 percent increase in May.

The rise in spending occurred even as Americans were becoming less upbeat about current economic conditions, the Conference Board said.