Consumer confidence declined in December, research group reports; level below analysts' forecast

Posted: Thursday, January 02, 2003

NEW YORK -- A research group's survey of consumer confidence declined sharply in December, largely because of the discouraging employment outlook.

The New York-based Confer-ence Board said Tuesday its Consumer Confidence Index dropped to 80.3 from a revised 84.9 in November, when the index reversed a previous five-month downward trend. Analysts had been expecting a reading of 88.0 in December.

Rising oil prices, the heightened threat of war in Iraq and recent tensions between the United States and North Korea over that country's nuclear weapons program also soured consumers' sentiment, said David Watt, a Toronto-based economist for BMO Nesbitt Burns.

Consumer confidence perked up in November because the stock market was rising, Watt said, but the optimism dissipated as the stock gains evaporated in December.

The market shrugged off the weaker-than-expected reading; the major indexes were essentially flat in light trading ahead of New Year's Day. The Dow Jones industrials rose 9 points to 8,342, while the Nasdaq composite fell 4 points to 1,336.

Lynn Franco, director of the Conference Board's consumer research center, said the discouraging job outlook was the major factor dampening consumers' spirits.

''Weak retail sales over the holidays clearly reflect the current mood of consumers,'' Franco said. ''Until there is an improvement in labor market conditions, there is not likely to be a significant upturn in consumer confidence.''

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

The index compares results with its base year, 1985, when it stood at 100.

The outlook for jobs was particularly grim, with 20.2 percent of consumers saying they expect fewer jobs to open up in the next six months, up from 18.8 percent in November. Those expecting more jobs fell to 15.1 percent from 15.4 percent.

Income expectations were dour, with just 18.7 percent of consumers anticipating a rise in their pay, down from 19.4 percent a month ago.

The Conference Board report showed waning optimism about current economic conditions, too.

The number of consumers rating current conditions as ''good'' fell to 14.6 percent from 16.1 percent in November, while the number sizing up the conditions as ''bad'' remained steady at an even 26 percent, the Conference Board said.

On the positive side, the number of consumers expecting an improvement in business conditions in coming months grew to 20.8 percent from 20.3 percent a month earlier. Respondents who held the opposite view declined to 11.0 percent, down from 11.3 percent in November.


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