September 30, 2009 in Business

Consumer spending declines last month

Drop not expected; home prices rise again
Anne D’Innocenzio Associated Press
 

NEW YORK – Concerns that consumers won’t help drive a speedy and strong economic recovery only escalated Tuesday after an influential barometer of confidence fell unexpectedly in September.

The Conference Board’s Consumer Confidence survey showed worries about job security seem to be offsetting any enthusiasm about rising home values and stocks.

“Last year, consumers were shellshocked as they worried about what might happen to the economy,” said Mark Vitner, senior economist at Wells Fargo. “Today, shoppers … don’t have the means to step up spending.”

The Conference Board, a private research group, said its confidence index dipped to 53.1 in September, down from a revised 54.5 in August. Economists surveyed by Thomson Reuters had expected a reading of 57.

The report followed rosier data on housing released Tuesday that showed home prices rose for the third month in a row in July. Investors fixated on the confidence report, giving back early gains. The Dow Jones industrials fell 47.16, or 0.5 percent, to 9,742.20.

Among the worrisome signs in the Conference Board’s release were that shoppers’ spending intentions declined for big-ticket purchases: cars, homes and major appliances.

The index, which hit a historic low of 25.3 in February, had enjoyed a three-month climb from March through May fueled by signs that the economy might be stabilizing. The road has been bumpier since June as rising unemployment has caught up with shoppers. Many economists expect confidence to be stuck at the current levels during the critical holiday shopping season.

A reading above 90 means the economy is on solid footing. Above 100 signals strong growth.

While the confidence index has doubled from the February low, it’s still about half of the historic average and below the 61.4 level right before the collapse of Lehman Brothers last fall.

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