Consumer Confidence Down

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Oct. 12, 2004--Amid growing economic uncertainty, including a persistently sluggish labor market and rising energy prices, consumer confidence dropped to its lowest level since July, according to a new poll by the AP.

Consumer confidence, as measured by the AP-Ipsos consumer confidence index decreased to 97.4 in September from 103.4 in August. The index was benchmarked at 100 in January 2002. The index is based on a poll of a 1,000 adults with a margin of error plus or minus 3%.

This new figure arrives at the same time the Department of Labor released weaker than expected job growth statistics. In September, the economy added 96,000, far below Wall Street forecasts of 148,000, which itself is barely enough to keep pace with population growth.

"The soft labor market conditions have weakened consumer confidence," said Lynn Franco the Director of the Conference Boards Consumer Research Center. "Until we get strong and persistent [job] growth, we will say at or around current levels [of consumer confidence]."

According to Franco, high energy costs are also dampening consumer confidence. On Friday, the price of oil price reached a new high settling at $53.31 per barrel--up $3 for the week and $27 compared to a year earlier.

Gasoline prices also remain near record highs. The nationwide average for a gallon of gas is $1.94--up 36.5 cents versus a year ago.

Another sign of a growing unease among consumers is their reluctance to borrow money for major purchases. In August, consumers reduced borrowing by 1.4%, or $2.4 billion, the largest dollar drop since December 1990.

A tightening of the consumer wallet, due in part to rising energy costs, is a trend that can be expected to continue through the holiday season. "What we've see is that they [consumers] have not been spending as robustly as they had been in the past," said Franco. "As winter approaches, high home heating costs mean that consumers will have less discretionary income for other purchases."