26 February 2002
Consumer confidence in the United States dropped unexpectedly in February, hurt in part by pessimism about the jobs outlook and the U.S economy. The results, which reversed two straight monthly gains, were released Tuesday by the Conference Board, a private business research group based in New York.
The group's consumer confidence index is closely watched because consumer confidence drives consumer spending, which accounts for about two-thirds of economic activity in the U.S., Tuesday's drop, about four points down from January's figures, fell short of Wall Street's expectations.
Economic data released Monday, showing a jump in U.S. auto and home sales, extended a rally on Wall Street, as analysts grew confident that the numbers hinted at robust consumer spending. But, the Conference Board's numbers dampened that optimism.
Investor confidence shook as the new survey was released. The stock market dipped within minutes, clipping a three-day run of gains. The latest consumer confidence figure, however, remains above 90, a level indicating that attitudes are still positive.
Conference Board economist Delos Smith believes the dip in confidence is temporary. He says it probably is a sign that the American consumer, while still willing to go out and buy, needs some clear answers about the pace of a U.S. economic recovery.
"A few steps forward. You have to have a few steps backward," he said. "We are all wondering where we're going and this is what the consumer is wondering too."
But economist Delos Smith cautions people not to read too much into one month's drop.
"It's a pause. But we're all in a pause," he said. "This is not something that is unusual. The equity markets want a direction. The fixed-income markets want a direction. So do consumers, so does business, want to know what kind of expansion we are going to have."
The index compares results to it base year" 1985 when it was at 100. The February figure of 94.1 was the lowest since November, when the reading fell to an all-time low of 84.9 following the September 11 attacks.