- The Washington Times - Wednesday, June 26, 2002

NEW YORK (AP) Americans' anxiety about corporate scandals and jobs dragged down consumer confidence to a four-month low in June in a reflection of lingering weakness in the economy.
The New York-based Conference Board said its Consumer Confidence Index fell to 106.4 this month from a revised 110.3 in May, the second biggest drop since the September 11 terrorist attacks. Analysts were expecting a reading of 106.0.
Sales of previously owned homes also dipped, though the figure for May was still the fourth-highest monthly level on record, thanks largely to low mortgage rates. Economists said the two reports point to moderate economic growth in the months ahead.
"It's been a very difficult month for the financial markets, but in addition we had a lot of international concerns that weighed on confidence," said Gary Thayer, chief economist for A.G. Edwards & Sons Inc.
Nevertheless, "consumers are still feeling better about things than they did six, seven months ago," he said. "We'll probably see them continue to spend and support economic growth going forward."
The industry group's index, based on a monthly survey of some 5,000 U.S. households, is closely watched because consumer confidence drives consumer spending, which accounts for about two-thirds of the nation's economic activity.
The index compares results with its base year, 1985, when it stood at 100. June's figure is the lowest since February, when consumer confidence stood at 95.0 amid congressional hearings investigating the Enron scandal.
The drop in confidence from last month also is the largest since the reading fell 11.7 points to 85.3 in October, after the terror attacks.
"Weak labor market conditions, generally soft business conditions and waning public confidence in questionable business practices have helped erode consumer confidence," said Lynn Franco, director of the Conference Board's research center.
Weighing on confidence was consumers' assessment of the employment picture, according to the Conference Board.
Consumers reporting jobs were currently "hard to get" increased to 23.1 percent from 21.8 percent in May. Those claiming jobs were plentiful decreased to 20.1 percent from 21.2 percent.
The jobs outlook for the next six months also weakened. Fewer consumers, 20.1 percent in June, expect more jobs to become available in the next six months, compared to 21.2 percent in May. Those expecting fewer jobs to become available rose to 14.2 percent from 13.6 percent.
"We have seen a basically stable employment picture because of a cautious attitude on the part of businesses," said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis. "But as employment improves later this year, consumer confidence should move upward with it."
On Wall Street, key stock indexes were mixed on the news. The Dow Jones average rose 20 points to 9,301 and the Nasdaq Composite Index fell 21 points to 1,440.
After slashing interest rates 11 times in 2001, the Federal Reserve has held rates steady so far this year. Fed Chairman Alan Greenspan has said generally low inflation gives policy-makers the luxury of waiting to see how the recovery unfolds before boosting rates, and many economists believe the Fed will leave rates unchanged at their two-day meeting ending today.
That should benefit home sales, which have remained one of the economy's few bright spots during the nation's recession last year.
The National Association of Realtors reported yesterday that sales of existing homes edged down 0.3 percent in May to a seasonally adjusted annual rate of 5.75 million.
Even with the drop, sales in May were brisk and the fourth highest recorded in a month since 1968.


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