US Consumers Fear Tougher Economic Times Lie Ahead

01 November 2007

NEW YORK: US retailers are preparing for an austere holiday season as the nation's consumers register a fall in economic confidence for the third month running, suggesting says the Conference Board, a "less than stellar ending to this year".

The Board's index for October moved down to 95.6 from a downwardly revised 99.5 in September and 105.6 in August. The latest figure is significantly worse than the 99 expected by analysts.

Consumers have become increasingly discomfited by the subprime mortgage crisis, the subsequent credit squeeze and fall in house prices, plus a general downturn in business conditions.

The research group's index for current economic conditions also fell to 118.8 in October from a downwardly revised 121.2 in September, while expectations for the next six months slipped to 80.1 in October, from 85 the previous month.

Comments Conference Board director of consumer research Lynn Franco: "Further weakening in business conditions has, yet again, tempered consumers' assessment of current-day conditions and may very well be a prelude to lackluster job growth in the months ahead."

The number of survey respondents calling current economic conditions "good" decreased to 23.4% in October from 25.7% in September, but, strangely, those saying conditions were "bad" also fell, to 16.3% from 17.8%.

The outlook for the labor market was also less than sparkling. The number of consumers anticipating fewer jobs in six months increased to 20.1% from 18.7% in September, while the percentage of consumers expecting more jobs in the months ahead was virtually unchanged at 13.5%.

Declares Yale economist Robert Shiller: "There is really no positive news in today's report. At both the national and metro area levels, the fall in home prices is showing no real signs of a slowdown or turnaround."

The continuing slide in house prices is fuelling recession fears. In response, the Federal Reserve has cut interest rates again in an effort steady the slump and boost consumer spending.

Data sourced from Wall Street Journal Online; additional content by WARC staff