WASHINGTON, Oct. 30 (UPI) -- The terrorist strikes, coupled with the parade of bleak corporate news and a slew of layoff announcements since Sept. 11, slashed October's consumer confidence to its lowest level in more than 7 years.
The Conference Board reported Tuesday that its Consumer Confidence Index fell to 85.5, down from 97 in September. The latest result is the lowest since February 1994, when the index hit 79.9.
"The economic outlook is becoming increasingly pessimistic, with consumer sentiment continuing to fall," said the Conference Board's Consumer Center Director Lynn Franco. "Widespread layoffs and rising unemployment do not signal a rebound in confidence any time soon. With the holiday season quickly approaching, there is little positive stimuli on the horizon."
Indeed, the New York-based board's expectation index, which gauges future economic activity, fell to 70.8 from 78.1, while the present situation index fell to 107.6 from 125.4. The organization surveyed approximately 5,000 households between Oct. 1 and Oct. 19 about the overall domestic economy, as well as their personal job prospects and spending plans.
Meanwhile, 20.7 percent of those surveyed stated that jobs are "hard to get," compared to 18.8 percent the previous month.
"The deterioration in labor market conditions have had the worst impact," said Scott Brown, the senior economist at brokerage house Raymond James.
He pointed out that companies had been laying people off even before the terrorist attacks, but that trend has only accelerated since then.
Of course, there is a discrepancy between what people feel and what they actually do, so there is no direct correlation between confidence and spending. Still, the negative outlook for the economy, and particularly job prospects is likely to weigh down spending in the coming holiday season. Nearly two-thirds of economic growth is tied to consumer spending, and a downturn in confidence is likely to hurt the already fragile economy still further.
Bank of America Economist Peter Kretzmer said that buying expectations for houses and big-ticket household appliances are likely to fall as confidence remains weak, but he pointed out that demand for automobiles is going up, given the financing incentives currently on offer.
As a result, most analysts expect the Federal Reserve to continue cutting interest rates when policymakers next meet on Nov. 6 as a means to prop up the ailing economy. Many anticipate the Fed to cut the key federal funds target rate by another half-percentage point, which would bring the rate down to 2.00 percent.
"That would be extraordinary," said Brown, but he added that the low rate would not bring any immediate relief to the economy.
