Consumer confidence unexpectedly fell last month for the sixth time in seven months as unemployment threatens to undermine spending and US economic growth early next year.
The Conference Board's index of sentiment decreased this month to 80.3, down from 84.9 in November and just above the nine-year low of 79.6 in October. Economists had expected a reading of 86, according to the median of 41 forecasts. The present conditions index fell to the lowest since January 1994.
Crude oil prices at US$31 a barrel are close to two-year highs, 6 percent unemployment is the highest since 1994 and there's a threat of war with Iraq. Retailers, following the smallest increase in holiday shopping in more than three decades, may be hard pressed to attract consumers who account for two-thirds of the economy.
"With worries mounting, it's not all that surprising that consumer spending appears to have fizzled," said Joseph Abate, a senior economist at Lehman Brothers Inc in New York, who forecast that confidence would drop to 82, the lowest in the Bloomberg News survey.
The Dow Jones Industrial Average and Standard & Poor's 500 Index are set to record their worst Decembers since 1931, another reason consumers are less confident. The S&P 500 declined 4 points, or 0.5 percent, at 11:50am. New York time. The Dow Jones Industrial Average fell 36 points, or 0.4 percent.
Sales gains for last month were below forecasts at Target Corp and Wal-Mart Stores Inc, and some shoppers may have been displeased that post-Christmas discounts weren't much better than before Dec. 25, analysts said. Retailers cut prices by as much as 75 percent early in the season to attract budget-conscious shoppers concerned about jobs, credit-card debt and the economy.
"Consumers are disappointed they're not seeing the discounts they want to see," said Britt Beemer, chairman of market research firm America's Research Group. "Some people may be waiting for the January clearance sales hoping they'll be better." The Conference Board's present situation index, which reflects Americans' view of labor and business conditions, fell to 69.9 last month from 78.3 in November. A gauge of consumer expectations for the next six months declined to 87.2 from 89.3.
The confidence report is based on a survey of 5,000 households that was conducted during the first three weeks of last month.
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