NEW YORK (AP) — Consumer confidence in the economy dropped more sharply than expected last month, dragged down by a still-sluggish job market.
The Consumer Confidence Index fell to 76.8 from the revised 81.7 registered in August, the Conference Board reported yesterday.
The decrease was steeper than expected — analysts were anticipating a reading of 80.5. It was the biggest decline since July, when consumer sentiment fell 6.5 points to 77. The index had bounced back in August.
“The lack of improvement in labor market conditions continues to dampen consumers’ spirits,” said Lynn Franco, director of the board’s consumer research center. “Despite September’s retreat, consumers remain cautiously optimistic about the outlook for the next six months. Consumer spending is likely to continue at or near current levels.”
Economists closely track consumer confidence because consumer spending accounts for two-thirds of the nation’s economic activity.
“We have enjoyed a period of optimism over the summer,” said Gary Thayer, chief economist at A.G. Edwards & Sons Inc., referring to the federal tax cuts, military victory in Iraq and gains in the stock market. “But now we are seeing a more sober view of things, primarily because of jobs.”
The nation’s unemployment rate dipped to 6.1 percent in August, but businesses cut 93,000 jobs, the seventh straight month of job losses. Robust productivity gains, meanwhile, have allowed companies to produce more with fewer workers.
Still, consumer spending has continued to grow moderately, increasing 0.8 percent last month on top of a 0.9 percent advance in July. Larger paychecks and other incentives from President Bush’s third tax cut have helped prop up spending.
Consumers anticipating that business conditions will improve during the next six months dropped to 21.4 percent from 22.6 percent in August. Those anticipating business conditions to deteriorate increased to 11.9 percent from 10.6 percent.
Those anticipating the job market to improve in the next six months decreased to 16.7 percent from 18.0 percent. Those expecting fewer jobs to become available increased to 21.0 percent from 18.6 percent.
Meanwhile, the Purchasing Management Association of Chicago said its index of area business activity fell to 51.2 last month on a seasonally adjusted basis from 58.9 in August. Economists were anticipating a decline to 57.0.
Still, a reading above 50 indicates that business is expanding and last month marked the fifth straight month that the Midwestern business barometer had indicated growth.