Customers cautious heading into holidays

By David Gill -- Home Textiles Today, 11/13/2000

NEW YORK -The consumer confidence index's heady trip into record-breaking heights may have finally ended last month.

As reported by The Conference Board, the October index fell 7.3 points from its September level, to 135.2-that's the lowest since exactly one year ago.

The overall index suffered from drops in each of its two main component indices: The present situation index dropped 5.5 points from September to October, to 177.0; and the expectations index shed 8.5 points, finishing at 107.4.

Lynn Franco, director of The Conference Board's consumer research center, said the declines were "triggered by a cooling economy and apprehension regarding soaring oil prices and volatility in the financial markets."

In particular, consumers showed their uncertainty about the current and future outlooks for jobs. According to the survey, which gathers about 5,000 consumer responses each month, the percentage of October respondents rating jobs as "hard to get" increased from 10.6 percent in September to 12.1 percent last month.

In addition, 13.1 percent of the respondents saw fewer jobs available over the next six months, as opposed to 10.9 percent in September. What's more, the percentage of those anticipating increases in their incomes fell from 28.1 percent in September to 24.2 percent.

First Union's chief economist David Orr noted that consumer confidence has a nearly perfect inverse relationship to the unemployment rate, and that much of consumers' unease reflects hearsay.

"Although the official unemployment rate has not ticked up consistently yet, the anecdotal evidence from manufacturing and dot.com layoffs has been growing," Orr said. "This month's levels, per se, are not 'bad,' but the potential turns can't be ignored."

Orr also took notice of the "ironic twist" in the fact that consumers' buying plans actually bounced back in the October survey.

In the survey, consumers increased their planning for a big-ticket purchase in the next half-year. Those planning a car purchase increased from 7.8 percent in September to 9.1 percent in October. Those planning a home purchase also rose, from 2.9 percent in September to 3.7 percent in October.

If oil prices stay firm, it's likely that consumers will continue to limit their shopping for the holidays.