Wed, Feb 27, 2002 page21

• Consumer confidence in US declines

  ECONOMY After reaching a five-month high, the index fell in February as consumers grew more cautious on the heels of ongoing layoffs and disturbing events on Wall St.

  • BLOOMBERG
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  US consumer confidence fell in February from a five-month high, reflecting less optimism about employment and income, an industry report showed.

  The Conference Board's gauge of sentiment dropped to 94.1 after rising to a revised 97.8 in January. Consumers' assessments of present conditions and their outlook for the next six months declined.

  The February decrease was the first in three months and the reading is better than November's 7 1/2-year low. The level of confidence remains high enough to underpin spending, which may boost business at retailers including Wal-Mart Stores Inc and JC Penney Co, and help the economy rebound, analysts said.

  "Consumers may be a little more cautious, but I see no signs that there is any panic developing," said Geoffrey Somes, an economist at Fleet Bank in Boston, before the report.

  The gauge of consumer expectations for the next six months fell to 93.6 this month from 97.6. The index measuring current conditions dropped to 94.8 this month, the lowest since October 1994, from 98.1 in January.

  Analysts had expected a reading of 97 in the confidence index after 97.3 previously reported for January, according to a Bloomberg News survey.

  The economy's imminent rebound will be more moderate than recoveries from previous recessions, said Jack Guynn, president of the Federal Reserve Bank of Atlanta, in a speech yesterday.

  "Consumer spending and housing are not likely to provide the usual kick we've seen coming out of previous recessions," Guynn told the Rotary Club of Nashville.

  Today's report showed less optimism about labor markets. The share of consumers who saw jobs as plentiful fell to 17.8 percent in February from 18.4 percent in January. The share seeing jobs as not so plentiful rose to 59.4 percent from 59.1 percent.

  Boeing Co, the biggest private employer in Southern California, said this week that it plans to cut as many as 1,050 jobs at its satellite-making unit in El Segundo and Torrance because of falling demand from telecommunications companies.

  Still, company firings have slowed. Initial jobless claims have held below 400,000 for seven straight weeks, the longest such stretch since March-April of last year, before the recession deepened. In January, the economy lost 89,000 jobs, the fewest in five months.

  UAL Corp's United Airlines said last week it will rehire 1,200 flight attendants laid off after the September terrorist attacks as the second-largest carrier restores some flights because of rising demand. The action, effective April 1, will bring to 2,000 the number of flight attendants rehired after United fired 2,700 following the attacks, a company spokesman said.

  Southwest Airlines Co also last week announced it plans to hire 4,000 employees this year as it adds new flights. And this month, Home Depot Inc, the largest home-improvement chain, opened 17 new stores, adding 3,000 workers.

  The outlook for incomes dimmed. The share of consumers who saw incomes rising fell to 19.9 percent in February from 20.1 percent in January. The report also showed the share planning to buy a major appliance rose to 27.8 percent from 27.7 percent. The share planning to buy automobiles increased to 7.9 percent from 7.6 percent. The share of consumers planning to buy a home fell to 3.8 percent from 4 percent.

  The report was in line with a drop in the University of Michigan's consumer sentiment index in February. The index slipped to 90.9 for the month from 93 in January, the first decline in five months, and reflected a drop in the outlook for the next one to five years.
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