Index hits five-year low as downturn continues

By David Gill -- Home Textiles Today, 3/5/2001

NEW YORK -In a recent economic commentary, Northern Trust Economist Asha Bangalore said a significant setback in consumer spending is "a plausible scenario."

With the release of The Conference Board's latest monthly data on consumer confidence, the plausible become reality. The board's monthly consumer confidence index fell to 106.8 in February, its lowest level since June 1996.

There are two major components to the index: present situations and expectations, and consumers responding to The Conference Board's monthly survey don't like the looks of either.

Both components fell in February-with the present dropping more than 10 points, finishing the month at 68.7; and expectations dropping more than six points, to 164.1.

What's more, just 10.2 percent of the 5,000 respondents to The Conference Board's survey thought more jobs would become available in the next six months, down from 11.7 percent in January. A larger percentage of the consumer respondents thought business conditions would be "bad" (11.4 percent, up from 10.7 percent in January) in the next six months; and fewer respondents expected business conditions to be "good" (30.7 percent, off from 34.5 percent).

"The erosion of consumer confidence continues to be fueled by weakening expectations regarding business and employment conditions," said Lynn Franco, director of The Conference Board's consumer research center. This was the index's fifth straight monthly decline.

Outside of the board, the report brought speculation over the fate of interest rates in the face of yet another sign of a soft economy. "Confidence is falling, and the Fed will cut rates further; but this does not look like an 'emergency' type report," said David Orr, chief economist for First Union Economics Group.

In terms of consumers 'opinions, Orr said that "while expectations about the general economy have definitely plunged into recession territory, feeling about personal conditions, while lower, are nowhere near recession levels," he said.

According to Bangalore, households "are already hard-pressed after the astronomical gas bills. Consumers are already deep in debt. Personal savings has shown a marked downward trend during the past three years."