- NEW YORK (Reuters) - Falling
stocks, longer unemployment lines and fears of a U.S. attack on Iraq dented
consumer confidence for a fourth straight month in September, a report
said on Tuesday, suggesting a consumer-driven recovery may be flagging.
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- The Conference Board, a private business research group,
said its monthly index of consumer attitudes fell to 93.3 -- its lowest
since November 2001 -- from a revised 94.5 in August.
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- While the drop was less than analysts had expected and
the index remains above recessionary levels, confidence has slipped steadily
since the spring. The index is down 17 points from its March peak and may
point to weak consumer spending ahead.
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- "These results continue to fan concerns that resilient
consumers will finally began to pull back," said Jade Zelnik, chief
economist at Greenwich Capital Markets.
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- Consumers so far have led economic growth, financing
their spending by taking advantage of the lowest mortgage rates in a generation,
widespread price discounting and zero-interest rate loans on cars and furniture.
But recent reports, including Wal-Mart Stores Inc. and Maytag Corp. expecting
sluggish sales, have hinted their appetites may be sated.
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- Indeed, economists are worried renewed deterioration
in the labor market seen in rising first-time claims for unemployment the
past month could undermine consumer spending, which accounts for two-thirds
of the economy.
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- The Federal Reserve expressed similar concerns on Tuesday
when it left short-term interest rates unchanged at 1.75 percent but said
"considerable uncertainty persists" about when employment and
production will pick up. Two Fed policy makers even voted to cut interest
rates.
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- Blue-chip stocks at first rallied on relief that consumer
confidence is not deteriorating sharply but then tumbled to four-year lows
on the Fed's statement. The Dow Jones industrial closed down 2.4 percent
at 7,683.13.
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- Weak stocks and softening consumer confidence buoyed
prices of Treasury securities, pushing yields to new historic lows. The
two-year note, a proxy for Fed rate cut expectations, ended at 1.87 percent,
down from 1.91 percent on Monday.
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- The Conference Board's findings were echoed in an ABC/Money
poll, released later on Tuesday, which said its Comfort Index remained
at minus 15, following a sharp drop earlier this month.
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- JOBS HARDER TO GET
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- The Present Situation Index, a measure of consumers'
attitudes about the economy and their finances right now, marked a new
eight-year low, falling to 88.5 in September from 93.1 in August.
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- The Expectations Index, a gauge of consumers' six-month
outlook, rose slightly to 96.5 in September from 95.5 in August. But consumers'
plans over the next six months to buy big-ticket items like cars, homes
and home appliances sagged.
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- Worries about the job market also increased. The jobs
hard to get index rose to 25.5, its highest level since 1996, up from 23.8
percent in August. A rise in this index often foreshadows higher unemployment,
now at 5.7 percent.
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- Joseph LaVorgna, senior U.S. economist at Deutsche Bank
Securities, called this unambiguously negative. "As companies shed
more labor, that will take a toll on consumer confidence. The report clearly
shows a deterioration in the labor market with September looking to be
the worst."
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- Many economists expect the jobless rate to top 6 percent
and remain at high levels through next year before improving.
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- "Weak labor market conditions continue to erode
confidence," said Lynn Franco, director of The Conference Board's
consumer research center.
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- SPENDING PLANS DOWN
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- The September consumer confidence report showed that
people are pulling back a little on their plans to buy big-ticket items,
such as new cars, washing machines and vacations.
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- Only 25.8 percent of consumers planned to buy a major
appliance in the next six months, down sharply from 31.3 percent in August,
now at its lowest level since October 1997.
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- The percentage of consumers planning to buy an automobile
fell to the lowest level since June 2001, to 6.8 percent from 7.4 percent.
Those planning to buy a new home tumbled to the lowest since last November,
at 3.3 percent from 4.5 percent.
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- Maytag on Monday warned its third-quarter earnings will
fall short of forecasts as it girded for consumers to spend less on refrigerators
and major appliances.
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- Reports on chain store sales on Tuesday also showed a
slight pullback, with Bank of Tokyo-Mitsubishi and UBS Warburg index falling
1.7 percent in the week ended Sept. 21 after holding steady in the preceding
week. While Instinet's Redbook Retail Sales Average rose 0.6 percent in
the same week, it was the softest weak so far this month.
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- Similarly Wal-Mart, the world's largest retailer, said
on Monday expected same-store sales in September to come in at the low
end of its growth forecast of 4 percent to 6 percent.
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- The Conference Board surveys a sample of about 5,000
households by mail to compile its monthly report. Surveys were received
up until Sept. 16.
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