Consumer confidence unexpectedly falls in July | VailDaily.com
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Consumer confidence unexpectedly falls in July

NEW YORK – Americans’ anxiety about the economy and their jobs resurfaced in July, sending a widely followed measure of consumer confidence downward and ending a three-month winning streak.The Conference Board said Tuesday its Consumer Confidence Index fell to 103.2 from a revised 106.2 in June. The July figure was worse than the 106.2 analysts expected, but was still considered solid.In May, the index rose to 103.1 from April’s 97.5.Lynn Franco, director of the private research group’s Consumer Research Center, said the dip was “no cause for concern.””The overall state of the economy remains healthy and consumers’ outlook suggests no storm clouds on the short-term horizon,” Franco said in a statement. “Even the steady upward tick of fuel prices at the pump has done relatively little to dampen consumers’ spirits. Yet, while there is little to suggest a downturn in activity, there is also little to suggest a pickup.”Consumers’ sentiment contrasted with an upbeat assessment of the economy last week from Federal Reserve Chairman Alan Greenspan, who said he expected the economy to keep growing even as a flurry of job cuts from major corporations were announced.”There was enough bad economic news this month to justify a slight dip in consumer confidence,” said Mark Vitner, senior economist at Wachovia Corp., saying he believes the Fed is “overly optimistic.”Big companies including Eastman Kodak Co., Hewlett-Packard Co. and Kimberly-Clark Corp. have recently announced new job cuts. Vitner also cited higher gasoline prices as a factor in souring consumer sentiment.Terrorist bombings in London this month probably hurt confidence as well, Franco said.Vitner expects consumer confidence to bounce back, although he said the index won’t break out of its range of 90 to 110, consistent with moderate economic growth.Still, it’s hard to predict how sentiment will fare over the next few months, since consumers have surprised economists with their relative strong levels of confidence and robust spending despite rising oil prices.Several factors have helped mute the effects of rising prices: the stock market, which has gained 3 percent so far this month, rising home values and overall solid gains in employment despite highly publicized layoffs, economists said.”There’s been a surprising amount of resilience in the consumer sector,” said Patrick Fearon, senior economist at A.G. Edwards & Sons. Inc. “If oil prices stabilize, that is good news. But if they continue to go up, there is a greater risk in a drop in sentiment. Still, it is hard to pin down where oil prices will have to go to cause a problem.”Wall Street had little reaction to the confidence report. The Dow Jones industrial average rose 12.66 to 10,609.14 in late trading as investors focused on rising oil prices and earnings.Economists closely track consumer confidence because consumer spending accounts for two-thirds of all U.S. economic activity.One component of the Conference Board report, which looks at consumers’ views of the current economic situation, fell to 118.5 from 120.8. Another component, the Expectations Index, which measures consumers’ outlook over the next six months, declined to 93.0 percent from 96.4 in June.The Conference Board index is derived from responses received through July 19 to a survey mailed to 5,000 households in a consumer research panel. The figures released Tuesday include responses from at least 2,500 households.The outlook for the labor market was mixed. The number of consumers expecting more jobs to become available in the coming months edged up to 15.8 percent from 15.4 percent, while those expecting fewer jobs moved up to 16.8 percent from 16.4 percent in June. The proportion of consumers anticipating their incomes will increase in the months ahead declined to 18.6 percent from 19.9 percent.Consumers’ overall assessment of ongoing conditions was somewhat mixed in July. The number of those claiming business conditions are “bad” increased to 16.9 percent from 15.3 percent. However, those saying conditions are “good” improved to 28.7 percent from 26.7 percent.The employment picture was also mixed. Consumers saying jobs are “hard to get” rose to 23.8 percent from 22.5 percent, but those claiming jobs are “plentiful” remained at 22.5 percent.Consumers’ outlook for the next six months was marginally less favorable than in June. Those expecting business conditions to improve fell to 17.6 percent from 19.5 percent. Consumers anticipating that business conditions will worsen edged up to 9.6 percent from 9.0 percent.—On the Net:www.conferenceboard.org


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