Oct. 25, 2005--Consumer confidence has sagged to a two-year low in October, driven down by a pair of hurricanes, surging gas prices, and an uncertain job market, the government reported Tuesday.
The unexpected slump raises fears of a weaker holiday shopping season in the weeks ahead, according to the Conference Board, which tracks consumer sentiment. Reflecting the bleaker outlook of consumers, few small business owners are anticipating better business conditions in the coming months, a National Federation of Independent Business survey showed earlier this month.
The Board's monthly confidence index, already down in September by the sharpest drop in 15 years, dropped further to 85 this month from a revised reading of 87.5.
Also down was the present situation index, which fell to 108.2 from 110.4, and the expectations index, to 69.5 from 72.3.
The monthly index is based on a survey of 5,000 U.S. households through Oct. 18, with mid-month preliminary results reflecting responses from about half of those polled.
Lynn Franco, director of the Board's Consumer Research Center, blamed the ongoing declines on the two devastating storms in the Gulf region, followed by "pump shock" and a weakening labor market. "This degree of pessimism, in conjunction with the anticipation of much higher home heating bills this winter, may take some of the cheer out of the upcoming holiday season," Franco said.
William Dunkelberg, the NFIB's chief economist, agreed, saying winter weather will bring "huge increases in energy bills," hitting both businesses and consumers.
According to the Energy Department, households can expect to pay roughly $370 more on oil heating bills this year, more than a 30% increase over the previous winter.
Holiday shopping accounts for about one-fifth of annual retail sales, according to the National Retail Federation. It already expects sales to drop this year by 5%, to $435.3 billion, compared to last year. That would be the weakest pace of overall sales growth since 2002.
That's prompted some retailers to launch holiday sales events sooner rather than later, the NRF said, and is also moving a record number of shoppers online.