Consumer Confidence Falls Sharply, but Home Sales Rise
U.S. consumers felt their gloomiest in almost a decade in February, unstrung by talk of war and a grim job market, but that did not stop people from buying homes at a record pace.
The Conference Board index of consumer confidence sagged to 64.0 in February from 78.8 the previous month, when analysts had expected it to dip to 76.8. This was the largest monthly drop since September 2001 and took the index to its lowest since late 1993.
A jump in the index that measures how hard it is to get a job showed that people have more to worry about than a possible war and terror attacks.
“It’s clear that the reality of a dismal labor market is finally sinking in,” said Ram Bhagavatula, chief economist at Royal Bank of Scotland Financial Markets. “It raises question marks about hopes for a strong recovery this year.”
Analysts emphasized that although American consumers may like to pour out their worries to survey staff, the concerns have not stopped them from buying houses and cars at record rates.
Figures from the National Assn. of Realtors on Tuesday showed that sales of existing homes climbed to a record annual pace of 6.09 million in January from 5.91 million in December, defying all expectations for a retreat.
Conventional wisdom is still that once the uncertainty over Iraq eases, confidence will rebound and the economy will as well.
But analysts increasingly are concerned about a drag from rising energy prices, and the Conference Board pointed to fuel costs as one factor depressing sentiment.
Natural gas prices have surged this week as another cold snap ate into dwindling U.S. supplies, and pump prices for gasoline topped $2 a gallon in some areas, including California.
Reports on chain store sales Tuesday showed weakness, but it was largely due to predictable effects from the East Coast snowstorms.
The measure by Bank of Tokyo-Mitsubishi and UBS Warburg fell 0.8% in the week ended Feb. 22, compared with the week before.
Another report, the Redbook survey by Instinet Research, showed sales down 2.1% in the first three weeks of the month compared with January.
