The Associated Press
NEW YORK — Consumer confidence plunged in February as Americans worried about less-favorable business conditions and job prospects, a business-backed research group said Tuesday.
The Conference Board said its Consumer Confidence Index fell to 75 this month from a revised 87.3 in January.
The reading was the lowest since the index registered 64.8 in February 2003, just before the U.S. invaded Iraq, researchers said, and was far below the 83 expected by analysts surveyed by Thomson/IFR.
The index measures how consumers feel about the economy. It has been weakening since July, suggesting that wary consumers may retrench financially, which could fatigue the economy further.
The expectations index, which measures consumers’ outlook over the next six months, fared even worse. The expectations index dropped to 57.9 from 69.3 in January. The February figure was a 17-year low, the Conference Board said, standing just a bit above the 55.3 of January 1991.
In midmorning trading, the Dow Jones industrial average rose 17.99, or 0.14 percent, to 12,588.21. Broader indexes, including the Nasdaq composite and Standard & Poor’s 500, were down.
Lynn Franco, director of The Conference Board’s Consumer Research Center, said in a statement that the consumer confidence survey — which is based on a sample of 5,000 U.S. households — indicated that consumers felt economic conditions were deteriorating.
“The weakening in consumers’ assessment of current conditions, fueled by a combination of less-favorable business conditions and a sharp rise in the number of consumers saying jobs are hard to get, suggest that the pace of growth in early 2008 has slowed even further,” Franco said in a statement accompanying the report.
She pointed to the low “expectations” reading and added: “With so few consumers expecting conditions to turn around in the months ahead, the outlook for the economy continues to worsen and the risk of a recession continues to increase.”
A third reading, the index looking at current conditions, also dropped in February to 100.6 from 114.3 the month before.
Those saying jobs were “hard to get” rose to 23.8 percent in February from 20.6 percent in January, while those claiming jobs were “plentiful” decreased to 20.6 percent from 23.8 percent.
Anthony Chan, managing director and chief economist with JPMorgan Private Client Services in New York, said he believed “jobs and energy prices are weighing down on consumer confidence.”
The weakening job situation also has been reflected in growing numbers of claims for unemployment benefits, he noted. The four-week average for claims, released by the Labor Department, rose to 360,500 last week — the highest level since claims spiked in October 2005.
Chan said he expects the first two quarters of this year to be “challenging,” with a 50 percent to 55 percent chance of a recession. He expects economic growth to resume in the second half because of Federal Reserve interest rate action and the Bush administration’s tax rebates this summer.
“The Fed began easing last August and began lowering rates in September … and monetary policy impacts the economy with lags,” he said. “And the stimulus package in the second half of the year will be a nice shot in the arm for consumer spending.”
In Washington, meanwhile, the Labor Department reported that inflation at the wholesale level soared in January, pushed higher by rising costs for food, energy and medicine. The monthly increase carried the annual inflation rate to its fastest jump in a quarter century.
The department said wholesale prices rose 1 percent last month, more than double the 0.4 percent increase that economists had been expecting. The January surge left wholesale prices rising by 7.5 percent over the past 12 months, the fastest pace in more than 26 years.
And Standard & Poor’s said Tuesday that U.S. home prices lost 8.9 percent in the final quarter of 2007, marking a full year of declining values and the steepest drop in the 20-year history of its housing index.
The S&P/Case-Shiller home price indices, which include a quarterly index, a 20-city index and a 10-city index, reflect year-over-year declines in 17 metropolitan areas with double-digit declines in eight of them.
On the Net: