U.S. consumer confidence
probably dropped in July by the most in nine months, eroded by
falling stock prices and a sluggish job market, economists said in
advance of today’s report.
A reading of 101 is likely in the Conference Board’s consumer
confidence index, based on the median of 43 forecasts in a
Bloomberg News survey. The decline from 106.4 in June would be the
largest since October, when the economy was still reeling from the
Sept. 11 terrorist attacks.
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The Standard & Poor’s 500 Index dropped 12 percent between
July 1 and July 26 as investors question the reliability of
corporate earnings following the bankruptcy filings of WorldCom
Inc. and Enron Corp. The recent stock slide extends more than two
years of declines and may keep consumers shopping at discount
stores instead of at more expensive retailers.
“High-end retailers are suffering right now,” said Gary
Thayer, chief economist at A.G. Edwards & Sons Inc. in St. Louis.
“But that doesn’t mean all retailers are. The drop in the market
has created a sense of uncertainty for consumers, and that could
damp their expectations for the future, but that won’t necessarily
keep them from spending.”
The Conference Board releases the report at 10 a.m.
Washington time. The New York group’s survey of 5,000 households
was conducted during the first three weeks of July. Confidence may
influence consumer spending, which accounts for two-thirds of the
U.S. economy.
Michigan Survey
The report follows by four days a University of Michigan
survey showing that in July, consumer sentiment dropped by the
most since the terrorist attacks last September. The reading of
88.1 in the group’s index, down from the month-earlier 92.4, was
better than the expected 86.5. Economists said the July reading
signaled that consumers who were shaken by stock declines might
still have enough confidence to keep spending.
Wal-Mart Stores Inc., the world’s largest retailer, said
yesterday that same-store sales in July would rise by at least 5
percent from the same period a year earlier.
Costco Wholesale Corp., the biggest U.S. warehouse club
operator, earlier this month reported that its same-store sales
rose 6 percent in June from a year earlier. That helped push the
U.S. retail industry’s same-store sales up 5.1 percent last month,
according to the Bank of Tokyo-Mitsubishi Ltd.’s index of 82
retailers. The gain was the largest since March.
Jobs
The Conference Board’s survey is tied to the labor market,
with two of the five questions focused on the availability of jobs
and one on incomes. Companies have been slow to hire as the
economy recovers from recession, and the unemployment rate rose to
5.9 percent in June, close to an almost eight-year high of 6
percent set in April. The jobless rate probably stayed at 5.9
percent in July, a separate Bloomberg survey found.
In a report published four years ago, Federal Reserve
economists said that the Conference Board’s current conditions
index, which accounts for 40 percent of the consumer confidence
report, “serves as a good proxy for the level of economic
activity.” They also said that the expectations index, a gauge of
the economy’s performance over the next six months, which makes up
the remaining 60 percent of the report, is “incrementally
informative about the path of total personal consumer spending
growth.”
The U.S. economy grew at a 6.1 percent annual rate in the
first quarter. Growth probably slowed to a 2.3 percent pace in the
second quarter, economists said in advance of a report to be
released Wednesday.
Bloomberg News
