Job woes knock US consumer confidence to 9-mth low

NEW YORK - A measure of US consumer confidence slid to a nine-month low in August as worries about job growth and the economy overshadowed a pause by the Federal Reserve in raising interest rates, a survey showed on Tuesday.

By (Reuters)

Published: Tue 29 Aug 2006, 9:49 PM

Last updated: Sat 4 Apr 2015, 1:04 PM

The Conference Board said its index of consumer sentiment dropped in August to 99.6 -- its lowest since November 2005’s 98.3 -- from 107.0 in July. Sentiment scaled a high for the year of 109.8 in April.

The median forecast of 86 economists polled by Reuters had called for the index to fall to 103 in August. Estimates ranged from a low of 99 to a high of 106.8.

“Less favourable business conditions coupled with a less favourable job scenario have resulted in the largest one-month decline in confidence since Hurricane Katrina last year,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement.

“Consumers are growing increasingly pessimistic about the short-term outlook.”

The Fed’s policy-setting committee voted to leave its benchmark federal funds rate steady at 5.25 percent on Aug. 8 after some two years of raising official US short-term rates but left the door open to future rate increases in case inflation proved tenacious.

After the data, US stock indexes turned negative, reversing earlier mild gains. Treasury prices slightly pared losses but remained in negative territory, with benchmark 10-year notes trading 5/32 lower in price for a yield of 4.82 percent from 4.79 percent late on Monday.

Two-year notes were 2/32 lower in price for a yield of 4.92 percent, against 4.88 percent late on Monday.

The business research group’s present situation index dropped to 123.4 from 134.2 in July, while the survey’s expectations component fell to 83.8 from 88.9.

The Conference Board’s one-year inflation expectations index rose to 5.5 percent in August from 5.1 percent in July.

“Confidence was lower than expected, but (that) doesn’t change our expectations for a soft landing for the economy rather than a hard landing,” said Patrick Fearon, senior economist at A.G. Edwards and Sons in St. Louis, Missouri.

“The rise in inflation expectations could be due to the high gasoline prices in early August. The index might not have captured the decline in gasoline prices late this month.”

Labor market conditions became less favorable in August, the Board said. The percentage of consumers surveyed who said jobs were “plentiful” dropped to 24.4 percent in August from 28.6 percent in July while those who said jobs were “hard to get” rose to 21.1 percent from 19.6 percent.

Sentiment indexes have traditionally been seen as a gauge of consumer spending, which accounts for roughly two-thirds of US economic activity, although actual spending patterns have not always correlated clearly with them.

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