Tuesday, October 26, 2004
Bad news for Bush: Consumer confidence down
A consumer confidence index, compiled from a survey of 5,000 households, dropped 3.9 points from the previous month to 92.8 in October, the economic research group said.
It was the lowest reading since March.
"Subdued expectations, as opposed to eroding present-day conditions, were the major cause behind October's decline in consumer confidence," Conference Board consumer research chief Lynn Franco said.
"And, while consumers' assessment of the labor market this month showed a moderate improvement, the gain was not sufficient to ease concerns about job growth in the months ahead."
Consumer confidence is closely watched because people's spending accounts for two-thirds of US economic activity. In August, consumer spending was flat, according to latest government figures.
Merrill Lynch chief North American economist David Rosenberg predicted that consumer spending growth would slow to 2.7 percent in 2005 from a likely 3.5 percent his year.
The 2005 forecast, weaker than most analysts' estimates, would represent the softest pace since 2001 and second weakest since 1995, he said in a report this week.
Savings rates were at a record low 0.9 percent and Bush's tax cuts had already added a full percentage point to annual consumption growth, Rosenberg said.
"No matter who wins the election, we believe the fiscal flexibility for the next president will effectively be zero. So do the arithmetic: with little room for either savings rate depletion or tax stimulus, look for consumer spending to rise close to a 2.5 percent annual rate in coming years."
And aside from the gas pump, consumers are largely unaware of what is happening to their dollars.