Consumer confidence fell sharply in September. The Conference Board Consumer Confidence Index was 97.6, dropping 16.4 points from August. This is the largest one-month drop since the 23 points lost in October 1990, and the lowest index since January 1996 (88.4). Economists had originally estimated September consumer confidence at 105. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
Comparisons have been made between the 23-point drop during the Gulf War in 1990 and the drop in September. Although the September 11 events will have an effect on consumer confidence, 88 percent of these surveys were taken before September 11, indicating that the comparison at this time is not relevant. The October or November index may contain a more accurate representation of the change of views after the attacks.
This month's Consumer Confidence Index is 44.3 points lower than the 141.9 index in September 2000. Several factors have lead to the general decline in consumer confidence over the past year, including rising unemployment rates, falling stock prices, and the threat of layoffs during the overall economic slowdown.
The updated September University of Michigan's Consumer Sentiment Index, a comparable index, was 81.8. This was a drop of 9.7 points from August. Interestingly, the Consumer Sentiment Index remained above the 80.0-mark anticipated by many analysts. This survey contains post-September 11 data and shows a similar trend in consumer sentiment between these and the Gulf War events. Again, the coming months, after the immediate shock and emotion subsides, will give a better indication of the long-range effects of recent events.
It is difficult to predict the future of the economy. These two consumer indices suggest that consumers have an uncertain outlook for the future, which limits spending. Consumer spending accounts for two-thirds of the economy, so any decrease will have a negative impact. Other factors, such as oil prices and winter weather, further complicate the predictability of future spending. In an effort to boost the economy, the Federal Reserve is expected to cut interest rates in October, the ninth cut of 2001.
Sources:
www.cnnfn.com, 9/28/01
www.conference-board.com, 9/28/01
www.economy.com, 9/28/01
