Confidence plunges to record low

A key measure of U.S. consumer confidence plunged in October to its lowest ever, as the financial crisis spread, job losses rose, and Americans watched their stock portfolios nosedive.

"The impact of the financial crisis over the last several weeks has clearly taken a toll," said Lynn Franco, director of the New York-based Conference Board's Consumer Research Center.

"This news does not bode well for retailers who are already bracing for what is shaping up to be a very challenging holiday season," Franco said.

The overall confidence reading fell 23.4 points during the month, to 38 from 61.4. That's the third-biggest drop in the survey's 41-year history. Fewer than 11% of consumers expect their incomes to increase in coming months, the smallest slice ever. The index is based on a phone survey of 5,000 households through Oct. 21.

The dire news didn't prevent the Dow Jones industrials from soaring nearly 900 points Tuesday — a surge that only cut its 2008 loss to 32% and evoked comparisons with five other short-lived rallies the past month.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, has held up in recent years despite terrorist attacks, hurricanes and recessions. Americans appear to be finally pulling back, however. "The first U.S. consumer recession in 18 years is in full swing," says Harm Bandholz, economist at UniCredit Markets.

He predicts that a government report due out Thursday, providing the first look at economic growth in the third quarter, will show the steepest decline in consumer spending since a deep 1990-91 recession. The consensus among 45 top economists surveyed last week by USA TODAY is that the economy contracted in the third quarter. They expect the economy to shrink for three consecutive quarters.

The Conference Board said the share of consumers who expect the economy to erode during the next six months jumped to 37% from 21%.

Other downbeat reports Tuesday:

•The Federal Reserve Bank of Richmond reported a sharp drop in manufacturing along the Southeast seaboard.

•Michael Niemira, chief economist of the International Council of Shopping Centers, which issues a weekly survey of chain store sales, said consumers are spending modestly, and mainly on everyday items.

Join the Discussion
You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus
 
You Might Also Like...