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U.S. February Consumer Confidence Index Falls to 87.3 From 96.4

Feb. 24 (Bloomberg) -- Consumer confidence in the U.S. economy fell the most this month since the start of the Iraq war as people became more gloomy about job and income prospects, a report by a private research group showed.

The New York-based Conference Board's sentiment index for February dropped to 87.3, the lowest since October, from a revised 96.4 in January. The decline was the biggest since a 14-point decrease in February 2003, a month before the start of fighting in Iraq. Optimism about both current and future conditions fell for the first time since September.

''Consumers remain disheartened with current economic conditions, and at the core of their disenchantment is the labor market,'' said Lynn Franco, director of the Conference Board's Consumer Research Center. ''The pace of job creation remains too tepid to generate a sustainable turnaround in consumers' confidence.''

The economy has created jobs at a rate of 73,000 a month since September, a third of the average during the 10-year expansion from 1991 to 2001. Higher tax refund checks this year may give incomes the boost needed to keep consumers spending and the economy growing even as job growth lags.

Tax refunds and the lowest interest rates in more than 45 years ''are a very strong tailwind for consumers,'' said Elisabeth Denison, an economist at Dresdner Kleinwort Wasserstein in New York, before the report. ''Those will fade later this year, and then we will really need employment to pick up to keep consumer spending going.''

Economists had expected a reading of 92.5 this month, based on the median of 60 forecasts in a Bloomberg News survey, down from January's previously reported reading of 96.8, an 18-month high.

Assessment of Jobs

The Conference Board bases its sentiment index on a survey of 5,000 households about general economic conditions, their employment prospects and spending plans.

The component of the index that tracks consumers' expectations for the next six months fell to 96.8 from 107.8. A gauge of optimism about the present situation dropped to 73.1 this month from 79.4 in January.

Consumers' assessment of the job market deteriorated. The percentage who saw jobs as hard to get increased to 32.1 percent from 31.6 percent. The proportion who saw jobs as plentiful declined to 11.8 percent this month, compared with 12.3 percent in January.

Today's report also showed households grew more pessimistic about the outlook for jobs and incomes in the next six months. The percentage who thought more jobs would become available slumped to 18.7 from 22 last month. Those who expected incomes to strengthen dropped to 16.7 percent, the lowest since July, from 19.2 percent in January.

House, Car Buying

The share of consumers planning to buy a home increased to 3.4 percent from 3.3 percent. The percentage planning to buy a major appliance fell to 25.7 percent from 28.4 percent. This month's reading on appliance-purchase plans was the lowest since 24.9 percent in October 1997. Those expecting to buy a car eased to 6.2 percent from 6.4 percent.

Sagging optimism so far isn't damping sales at Wal-Mart Stores Inc. The world's largest retailer said yesterday that February sales at stores open at least a year are increasing near the high end of its expectations as shoppers bought more spring clothing and food. The Bentonville, Arkansas-based discounter had forecast a gain of as much as 5 percent from the year-earlier month.

Federated Department Stores Inc., the owner of Macy's and Bloomingdale's, today raised its sales forecast for February. Same- store sales this month will rise 7 percent to 8 percent, compared with a previous forecast of a 2 percent to 3 percent increase.

'Solid Recovery'

''It feels like a solid recovery happening,'' said Leonard Roberts, chief executive of RadioShack Corp., the No. 3 U.S. electronics-store chain, in an interview Thursday. ''Spending is increasing; traffic is up. It bodes well for the retail industry.''

Fort Worth, Texas-based RadioShack said last week fourth- quarter profit rose 9.9 percent and earnings this year will be more than analysts expected.

The economy may grow 4.6 percent this year, the strongest pace in two decades, according to the median forecast of 63 economists surveyed this month by Bloomberg News. Consumer spending is projected to rise 3.8 percent after growing 3.1 percent in 2003.

Tax refunds and lower tax payments will boost household incomes by about $70 billion over the first six months of the year, according to research from economists at Credit Suisse First Boston in New York.

Greenspan on Debt

Consumer debt isn't a threat to the U.S. economic expansion because interest costs have fallen and financial obligations as a ratio to income aren't rising, Federal Reserve Chairman Alan Greenspan said in a speech yesterday in Washington.

Total household debt is growing at the fastest pace since 1986, averaging a 10.6 percent annual rate in the first three quarters of last year.

Because stronger growth has yet to translate into more hiring, President George W. Bush's approval rate has dropped to a low of 50 percent, with more than half of adults saying they were displeased with his handling of the economy, an ABC-Washington Post poll released last week showed.



To contact the reporter on this story:
Carlos Torres in Washington ctorres2@bloomberg.net.

To contact the editor on this story:
Kevin Miller at kmiller@bloomberg.net.

Last Updated: February 24, 2004 10:00 EST

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Naja, der Ex-Heidelberger Chef Mehrdorn verwurstet jetzt die Bahn [img][/img]