September 16, 2005--Consumer confidence plummeted this month as Hurricane Katrina kept record-high energy costs soaring, a survey showed Friday.
The preliminary consumer sentiment index for September, prepared by the University of Michigan, dropped to 76.9 from 89.1 the previous month.
Also down was the survey's expectations index, dropping to 63.6 from 76.9 in July, and the outlook for current conditions, to 97.7 from 108.2.
The numbers released Friday were the lowest in over a decade, dropping below levels reported in the months after the Sept. 11, 2001 terrorist attacks.
Economists had estimated this month's preliminary index, one of the first to gauge the impact of Katrina on consumers nationwide, at levels ranging from 78 to 90.5.
"If consumers start pulling back on spending, that's going to affect all businesses, big and small," said Haseeb Ahmed, an economist at JP Morgan. But , he added, "lower consumer confidence doesn't necessarily foreshadow a decline in spending."
"That said, this is the largest drop since the 1970s. It's unprecedented and hard to predict what it's impact will be," Ahmed said.
He attributed the declines to a one-two punch of higher energy costs pushed further upward by last month's storm.
Katrina, which took out old refineries in the Gulf Coast and pushed gasoline prices above $3 a gallon, knocked a full percentage point off economic growth, the Congressional Budget Office reported earlier this week. It also wiped out some 400,000 jobs, according to the Labor Department, boosting unemployment benefits claims by 71,000.
High energy costs, which were rising before the storm, pushed overall producer prices up by 0.6% last month, Labor Department figures showed Tuesday.
In a survey issued Thursday, however, the department reported consumer prices outside of energy remained steady in August, a sign high fuel costs were being absorbed by the manufacturing and service sectors.
The monthly Michigan consumer confidence index polls some 300 households and offers a mid-month indication about how consumers feel about spending. A final report, surveying almost twice as many households, is issued at month's end.
Consumer spending, which accounts for about full two-thirds of the economy, is seen as an indication of economic growth.