- The Washington Times - Tuesday, January 28, 2003

NEW YORK, Jan. 28 (UPI) — The Conference Board said Tuesday consumer confidence in the nation's economy was knocked down in January by the country's continued lackluster economic activity and the threat of war with Iraq.

The private research group said its index measuring consumer confidence, which uses 1985 as a base of 100, fell 1.7 points to 79.0 from a revised 80.7 in December. The board originally reported confidence as 80.3 during December.

Economists on Wall Street were expecting confidence to drop to 78.3 during January, which would have been its lowest level since November 1993.

Consumer confidence hit an all-time high of 144.7 in May 2001 but sank to a 9-year low of 79.6 last October.

The survey of consumer attitudes concerning both the present situation as well as expectations regarding economic conditions is directly related to the strength of consumer spending.

Strong economic growth translates into healthy corporate profits and higher stock prices. The bond market focus is whether economic growth goes overboard and leads to inflation. Any change might be tipped off by a change in consumer sentiment.

Consumer spending accounts for two-thirds of the economy, so the markets are interested to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend.

The board said the survey, which is based on a representative sample of 5,000 U.S. households, showed its present situation index rose to 75.4 from 69.6 while its expectations index dropped to 81.4 from 88.1 a month earlier.

Lynn Franco, director of The Conference Board's Consumer Research Center, said, "Overall readings continue to reflect the country's lackluster economic activity. Now, with the threat of war looming, consumers have grown increasingly cautious about the short-term outlook."

The report showed consumers' expectations for the next six months are less optimistic than at year-end. Those anticipating business conditions to sour over the next 6 months rose to 14.0 percent from 11.0 percent. Those anticipating an improvement in the economy dropped to 17.7 percent from 21.1 percent.

The employment outlook was also less favorable. Consumers expecting fewer jobs in the coming months edged up to 20.9 percent from 20.2 percent. Those anticipating more jobs declined to 14.3 percent from 15.4 percent. Those anticipating an increase in their incomes declined to 18.4 percent from 19.6 percent in December.

The report also showed consumers' assessment of current conditions has improved, but still remains soft.

The board said consumers rating current business conditions as good increased to 15 percent from 14.5 percent. However, those holding the opposite view edged up to 26.5 percent from 25.9 percent.

Consumers reporting jobs are hard to get declined to 28.8 percent from 29.7 percent a month earlier. Those claiming jobs are plentiful increased to 14.5 percent from 12.3 percent.

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