Consumer confidence plummeted almost 19 points in September, its biggest drop in 15 years, as Americans worried about the economic fallout of Hurricane Katrina and rising gasoline prices.
The Conference Board said its Consumer Confidence Index, compiled from a survey of U.S. households, dropped 18.9 points to 86.6, from a revised reading of 105.5.
That marked the biggest fall since October 1990 when the index fell 23 points to 62.6 in the wake of the recession. The September reading was also the lowest level since October 2003, when it registered 81.7.
Analysts had expected the September reading to be 98.
“Hurricane Katrina, coupled with soaring gasoline prices and a less optimistic job outlook, has pushed consumer confidence to its lowest level in nearly two years and created a degree of uncertainty and concern about the short-term future,” Lynn Franco, director of The Conference Board’s Consumer Research Center, said in a statement. “Historically, shocks have had a short-term impact on consumer confidence,especially on consumers’ expectations.”
Franco added, however, that as rebuilding efforts in the aftermath of Katrina take hold and job growth gains momentum, consumers’ confidence should rebound and return to “more positive levels by yearend or early 2006.”
Economists closely track consumer confidence because consumer spending accounts for two-thirds of all U.S. economic activity.
One component of the Conference Board report, which examines consumers’ views of the current economic situation, fell to 108.9 from 123.8. Another component, the Expectations Index, which measures consumers’ outlook over the next six months, dropped to 71.7 from 93.3 last month.
The Conference Board index is derived from responses received through Sept. 20 to a survey mailed to 5,000 households in a consumer research panel. The figure released Tuesday include responses from at least 2,500 households.
Consumers’ overall assessment of ongoing conditions was considerably less favorable in September. Those claiming business conditions are “good” declined to 25.2 percent from 29.7 percent. Those claiming conditions are “bad” increased to 17.7 percent from 15.1 percent. The employment picture was also less upbeat. Consumers saying jobs are “hard to get” increased to 25.4 percent from 23.1 percent, while those claiming jobs are “plentiful” fell to 20.1 percent from 23.6 percent.
Consumers’ outlook for the next six months turned considerably pessimistic. Those anticipating business conditions to worsen increased to 19.8 percent from 10.0 percent. Those expecting business conditions to improve declined to 15.3 percent from 18.7 percent.
The outlook for the labor market also soured. Those expecting more jobs to become available in the coming months decreased to 14.0 percent from 16.4 percent in August. Those expecting fewer jobs increased to 25.0 percent in September, up from 17.3 percent in August. The proportion of consumers anticipating their incomes to decrease in the months ahead rose to 10.8 percent from 8.9 percent last month.
