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Consumer Confidence Dives to 9-Year Low
Tuesday February 25, 10:44 am ET
By Andrea Ricci

http://biz.yahoo.com/rb/030225/economy_consumer_6.html

NEW YORK (Reuters) - U.S. consumer confidence fell sharply and unexpectedly in February to its lowest level since October 1993 as Americans fretted about the increasing threat of war with Iraq, weak stock markets and rising oil prices.

The Consumer Confidence Index fell to 64.0 in February from a downwardly revised 78.8 in January, the Conference Board, a private business research group, said in a release on Tuesday.

It was the third consecutive monthly decline.

Economists on average had expected the index to fall to 76.8.

"Lackluster job and financial markets, rising fuel costs and the increasing threat of war and terrorism appear to have taken a toll on consumers," said Lynn Franco, director of the Conference Board's Consumer Research Center in a statement.

"This month's confidence readings paint a gloomy picture of current economic conditions, with no apparent rebound on the short-term horizon," she added.

The dollar slipped and U.S. stock prices extended losses while U.S. Treasury prices rose after the report was released.

"Obviously consumer confidence is weak. Both the expectations and present conditions are down. It's hard to say how much of this is a reflection of the severe winter weather (in parts of the U.S.) and the approach of the war, but possibly both factors are at play here," said Gary Thayer, chief economist at AG Edwards & Sons in St. Louis.

Severe winter snow storms in many parts of the country over the Presidents Day holiday in February kept shoppers at home.

Consumer confidence is closely watched by economists and businesses for clues about spending, which makes up two-thirds of the U.S. economy.

U.S. blue chip stock prices have fallen more than 3 percent in the last month and heating oil prices are at record highs.

"What's really bothering people is the closer prospect of war and also the big rise in oil prices and gas prices. These are very visible effects. Also, the questions on the labor market were weaker," said Kevin Logan, senior economist at Dresdner Kleinwort Wasserstein in New York.

The White House on Tuesday said there was still a "slim chance" that the Iraq crisis would end peacefully and that chances of this outcome could improve with passage of a new United Nations resolution on weapons of mass destruction.

The Conference Board's Present Situation Index, a measure of consumers' current attitudes about the economy and their finances right now, dropped to 61.6 in February from 75.3 in January. The Expectations Index, a gauge of consumers' six-month outlook, fell to 65.6 from a revised 81.1.

Consumers reporting "jobs hard to get" rose slightly to 30.1 from 28.9.

Not all economists found the data so gloomy.

Gregory Miller, chief economist at SunTrust Bank in Atlanta, said consumers were reacting to the threat of war and said economic fundamentals did not appear to be deteriorating.

"So even though confidence is down, we shouldn't expect consumer spending momentum to dissipate," he said.