NEW YORK (AP) Worries about future job growth and the economy pushed consumer confidence in December to its lowest level in two years, a business group said yesterday.
Economists said the decline in the Conference Board’s Consumer Confidence Index is an indication that consumer spending will continue to slow and hints at future troubles for U.S. businesses.
“It’s just not as positive an outlook as had been the case in the summer and fall,” said Kathleen Camilli, director of economic research at Tucker Anthony Sutro. “One would have to conclude it’s the impact of the stock market on people’s perceptions. It’s also the impact on employment, because employment conditions in some part of the country are starting to deteriorate.”
The Consumer Confidence Index fell to 128.3, slightly below analysts’ expectations. It was the third straight month of decline for the index and a drop-off from the revised 132.6 reported in November.
“While the overall index continues to signal economic growth, albeit at a slower pace, the continued decline in expectations is somewhat disconcerting,” said Lynn Franco, director of the Conference Board’s Consumer Research Center. “If expectations continue on this downward trend, a more severe slowdown may be on the horizon.”
The Conference Board index, based on a monthly survey of some 5,000 U.S. households, is considered a key indicator because consumer spending accounts for about two-thirds of the nation’s economic activity. The index compares results to its base year, 1985, when it stood at 100.
In a separate report yesterday, the Labor Department said new claims for state unemployment insurance fell sharply last week but still hovered at a level suggesting that employers’ appetite for workers is waning a bit.
In addition, the National Association of Realtors reported that sales of previously occupied homes rose by 4.4 percent last month to a seasonally adjusted annual rate of 5.22 million, spurred on by cheaper mortgage rates. That was the highest level since a rate of 5.28 million in August.
Most markets were higher in afternoon trading, with the Dow Jones Industrial Average up 77 points at 10,880 and the Nasdaq composite index, which is on track for its worst year ever, up one point to 2,540.
Consumer confidence has fallen sharply since the index recorded 142.5 in September. The last time the index fell below 128.3 was in December 1998, when it measured 126.7, Ms. Franco said.
“We’ve seen indications that the overall economic pace is cooling, and this is just one more piece,” she said, noting that the timing of the survey may have influenced the results. “Our cutoff date was shortly after the presidential decision was rendered and we think that oil prices and the fact that it looked like it was going to be a harsh winter may have been on consumers’ minds.”
Crude-oil prices have tapered a bit from their highs earlier this fall, though fears of a possible heating oil shortage in the Northeast and record-high natural gas prices continue to worry consumers.
The most notable decline this month came in consumer expectations, a component of the overall index that assesses how consumers view the short-term future. That outlook dropped from a revised 101.2 in November to 95.8 in December.
In particular, the figures show 10.2 percent of consumers expect business conditions to worsen, compared with 8.3 percent last month. In something of a contradiction, however, 16.7 percent of consumers expect conditions to improve, up from 14.7 percent.
About 15.9 percent of consumers expect fewer jobs to become available, up from 13.6 percent in November, the Conference Board report said.
The report also showed a slight increase in the percentage of consumers planning to buy major appliances and automobiles in the next six months, but a slight drop in plans to buy new homes.
Many hope the index and other economic data will persuade the Federal Reserve to cut interest rates sooner rather than later.
The Fed last week shifted its focus away from inflation to watching for signs of economic weakness; market watchers expect a rate cut sometime in January.