U.S. Consumer Confidence Fell to a Seven-Month Low (Update2) Listen
Oct. 26 (Bloomberg) -- U.S. consumer confidence fell for a third straight
month in October, suggesting growing voter discontent with the economy a
week before President George W. Bush seeks re-election.

The Conference Board's consumer confidence index dropped to 92.8, the lowest
since March, from a revised 96.7 in September, down from the previous
estimate. Americans' assessments of the current economy and their outlook
for the next six months fell.

The survey is the Conference Board's last before the U.S. presidential
election on Nov. 2. Since the index began in 1967, every incumbent president
has lost his re-election bid when the consumer confidence index was below 99
on Election Day.

``It's not good news for Bush. He can still win, but this is not a good
omen,'' said Delos Smith, a Conference Board economist. ``People are nervous
about their jobs and incomes.''

The median forecast of 65 economists surveyed by Bloomberg News was for
confidence to fall to 94 from an initial estimate of 96.8. Forecasts ranged
from 85.5 to 97. The Conference Board, a New York-based research group,
surveys 5,000 households on general economic conditions, people's employment
prospects, and spending plans.

The confidence index is below the 115.7 reading when Bush took office in
January 2001. Slowing job growth and rising oil prices in recent months have
pushed confidence lower since the measure reached a two-year high of 105.7
in July.

Jobs and Energy

The economy added an average of 103,000 jobs a month since June after
gaining 204,000 a month in the first half. Crude oil prices, which rose to
an intra-day record $55.67 yesterday, are up 80 percent over the past year,
pushing gasoline and heating oil costs higher. That threatens to erode
consumer spending and prompt companies to be more cautious about hiring.

``High energy and lower consumer confidence will lower the rate of growth,''
Lew Frankfort, chief executive of Coach, Inc., the largest U.S. seller of
luxury leather goods, said in an interview.

The component of the Conference Board index tracking assessments of current
economic conditions fell to 94.2 from 95.3 in September.

While the percentage of Americans that saw jobs as hard to get now fell to
27.8 from 28 percent, the percentage seeing business conditions as ``bad''
rose to 21.4 from 20.4.

A gauge of optimism about the economic outlook over the next six months
plunged to 92 this month from 97.7 in September. Consumers said the job
market and their own income prospects would worsen.

Employment Outlook

The percentage that said there would be more jobs available six months from
now fell to 16.5 from 17.8 in September, while 18.4 percent said their
incomes would increase, down from 20 percent a month ago.

The 4 1/4 percent Treasury note maturing in August 2014 rose 1/32 to yield
3.97 percent at 10:16 a.m. in New York.

The decline in the Conference Board index is consistent with the Oct. 15
preliminary reading on consumer sentiment from the University of Michigan.
The university's index fell to 87.5 from September's 94.2. The final
Michigan reading for October will be released Oct. 29.

Most national polls, including one released today by the Los Angeles Times,
show a statistical tie in the race between Bush and his Democratic
challenger, Massachusetts Senator John Kerry.

Economic Policies

``It'll be tougher for Bush to make the case'' for re- election, said
Charles Gabriel, a senior political analyst at Prudential Equities LLC in
Washington.

Voters are signaling their disapproval with Bush's economic policies. A
majority of those surveyed by the Times, 51 percent, disapproved of the way
the president is handling the economy. An Annenberg Center survey released
yesterday found 41 percent said Bush's policies have made the economy worse;
34 percent said he's made the economy better.

U.S. investor optimism dropped to a 12-month low in October. The UBS Index
of Investor Optimism sank to 62, its lowest since September 2003 and down
from a reading of 74 last month.

The Conference Board index has been below 99 in the month prior to Election
Day three times since the survey began in February 1967. In each case, the
incumbent lost the White House.

Bill Clinton defeated George H.W. Bush in 1992 when the gauge was 54.6.
Jimmy Carter lost to Ronald Reagan in 1980 when the index was 84.2. The
confidence index was 87.1 when Carter defeated Gerald Ford in 1976.

Regions

This month, the Conference Board found consumer confidence lowest in the
Middle Atlantic and East North Central regions, which include the
battleground states of Pennsylvania, Ohio, Wisconsin, and Michigan.
Confidence is strongest in the South Atlantic region, which includes
Florida.

Consumer confidence is higher under Bush than under the previous incumbents
who lost, and it's well above last year's levels, when the Conference Board
gauge averaged 79.8. During the record 10-year expansion from 1991 to 2001,
the index averaged about 103.

``What it means is the election will be close,'' said the Conference Board's
Smith. ``It'll make the Bush people very nervous.''

The drop in confidence may reflect Americans' concern about what they'll
have left to spend after paying more for gasoline and heating oil. Gasoline
prices reached $2.08 a gallon last week, according to the Energy Department.

Buying Plans

While studies have shown confidence indexes don't always accurately predict
how consumers will behave, the three-month drop likely will mean slower
``growth in consumer spending,'' said William Hernandez, chief financial
officer at PPG Industries Inc. the world's second-biggest maker of car
paint, in an interview.

The Conference Board survey found the percentage of consumers planning to
buy a car rose to 7.4 percent from 6.3 percent last month. The percentage
planning to buy a home dropped to 3.5 from 3.9. The percentage planning to
buy a major appliance fell to 27.1 percent from 29.8 percent.

Economists have trimmed fourth-quarter growth estimates, now estimating the
economy will expand at a 3.8 percent annual rate after expanding at an
estimated 4.3 percent pace from July through September, according to the
median of economists surveyed.

Consumer spending, forecast to increase at a 4.6 percent annual rate in the
third quarter, will probably slow to a 3.1 percent pace in the final three
months of the year, according to the Bloomberg News survey.

``I think the best thing to do is get the elections behind us,'' said J.C.
Penney Co. Chief Executive Allen Questrom, in an interview Oct. 22.

Americans have ``been bombarded by the negative campaign,'' Questrom said.
``That's been going on for so long that it will be good to get that over
with one way or the other.''



To contact the reporter on this story:
Joe Richter in Washington .

To contact the editor responsible for this story:
Kevin Miller at .
Last Updated: October 26, 2004 10:46 EDT

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