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Consumer confidence index drops sharply
Wednesday, July 01, 2009

Consumer confidence figures released yesterday show consumer sentiment, though higher than at the beginning of the year, dropped sharply in June following three months of gains.

The Conference Board Consumer Confidence Index came in at 49.3 for the month of June, down from 54.8 in May. The monthly survey is based on a representative sample of 5,000 U.S. households.

"The general apprehension that we've been seeing for quite some time is still being expressed by consumers," said Lynn Franco, director of the New York-based Conference Board Consumer Research Center.

Yet, she added, "Even with this decline that we've seen in June, overall confidence is stronger than at the beginning of the year."

The Consumer Confidence Index is a monthly indicator of consumers' attitudes and buying intentions. The Conference Board asks shoppers to give their assessment of current business and employment conditions as well as their expectations for business conditions, employment and personal income in six months.

The board's results are widely watched and used, along with other factors such as jobless rates and manufacturing orders, to try to determine the overall direction of the economy.

The latest results seemed to indicate continued uncertainty among consumers. The Consumer Confidence Index started the year at 37.4 in January, then dropped to 25.3 in February. It rose in March to 26.9. In April, it rose to 40.8 and then went further up in May, only to fall back a bit in June.

Ms. Franco attributed the low numbers posted at the beginning of the year to the "shock effect of the financial meltdown."

"A little of that shock impact has worn off and now we are at levels we normally see during a recession," she said. The June numbers show the economy is still weak overall, she said.

The Conference Board's Present Situation Index, which captures shoppers' assessment of current business and unemployment conditions, fell to 24.8 in June from 29.7 in May. The Expectations Index, which reflects predictions for business conditions, general employment and personal income in six months, declined to 65.5 in June from 71.5 in May.

"We're expecting it to be a long haul," Ms. Franco said. "We don't forecast a rapid recovery or a strong recovery."

The board is forecasting positive growth toward the end of 2009 but growth will be modest, she said.

Survey responses to questions on current labor market conditions were not as negative as in the first quarter of the year, but remained pessimistic. Those anticipating more jobs would be available in the upcoming months dropped to 17.4 percent in June from 19.3 percent in May, while those expecting fewer jobs increased to 27.3 percent in June from 25.6 percent in May.

"The pessimists continue to outnumber the optimists in terms of the employment outlook," Ms. Franco said.

The next Consumer Confidence Index numbers will be released July 28.

Kaitlynn Riely can be reached at kriely@post-gazette.com or 412-263-1468.
First published on July 1, 2009 at 12:00 am