Consumer confidence in the United States plunged almost 12 points in October to its lowest level in more than seven years. The latest survey, released Tuesday by the Conference Board, a private business research group, is the first real measure of attitudes since the September 11 terrorist attacks on New York and Washington.
The consumer confidence report was much worse than Wall Street expected. Confidence has been slipping throughout the year. But the survey suggests that the economic outlook in the United States is growing increasingly pessimistic.
Conference Board economist Delos Smith notes the main reason is the growing number of job layoffs, exacerbated by heightened fears of terrorism. "We have an employment report out on Friday," he said. "The consensus is it will be down 300,000. The unemployment rate, 5.2-5.3. The continuous claims at 18-year-highs. The initial claims over 500,000. And again, this is always driven by the job market and people are very nervous about the job market, and the continuous business of anthrax."
Economist Smith says analysts should not underestimate the effects that even the potential for new terrorist attacks has on business activity, which the Conference Board predicts will see further slumping. "You've ripped the social fiber," stressed Mr. Smith. "Everybody talks about being normal. Well, what is normal? It's not being normal when you have anthrax scares, you're scared about the mail, and you're jittery."
The survey shows Americans are planning less airline travel in the near future. Many people will be taking their leisure closer to home and for shorter periods of time.
As for spending plans, a drop is anticipated. But experts say it may not be as sharp as many had feared. In fact, the latest reports show retail sales are starting to move up again. This is a key element. Consumer spending drives two-thirds of U.S. economic growth.