Americans tightening their purses Copyright © 2001 Nando Media Copyright © 2001 Christian Science Monitor Service

By RON SCHERER, The Christian Science Monitor

(April 25, 2001 4:04 p.m. EDT) - The Grochocinskis of North Carolina are further evidence that the U.S. economy is in trouble. The couple went shopping for furniture last weekend, but after wandering through showrooms, they decided not to buy a new entertainment center.

"Now, I'm thinking of making it myself - anything to save a big penny here and there," says Paul Grochocinski, who lives in the Raleigh-Durham area and works for a high-tech company that's laying off thousands of workers.

Like the Grochocinskis, many Americans are starting to curb spending on big-ticket items in a further sign that consumer confidence - one of the key drivers of the U.S. economy - is falling.

Many are brown-bagging it with baloney-and-cheese sandwiches. Others are laying off the credit cards. Most are definitely not pulling out the checkbook for expensive vacations or faux 19th-century armoires. Instead, they want to see what's going to happen with their jobs and the economy for the rest of the year.

The depth of the trend was underscored yesterday when the Conference Board, a business-research group, reported that its survey of consumer confidence slid sharply. The latest report shows that individuals now see their current situation as weaker. In past surveys, consumers only expected their prospects to decline. If this trend continues, "It is foretelling of economic hardship," says Lynn Franco, director of the Board's Consumer Research Center. But, she adds, "We're still not at levels we see prior to a recession."

How people perceive their future is critical to the well-being of the economy, since two-thirds of the nation's gross domestic product is related to consumer spending. Any shift in consumer psychology can impact auto manufacturers, airline companies, or, in the Grochocinskis' case, furniture production. Since mid-1997, confidence has been high, which has helped to buoy the nation's prospects.

The Conference Board report comes at a critical time for the economy. Over the past five months, consumers have been saying they're nervous about the future. Now, with layoffs spreading, people are beginning to feel the economy is worsening.

"What it could mean is that the consumer will be more cautious this spring than they were in the first quarter," says Stuart Hoffman, chief economist for the PNC Financial Services Group in Pittsburgh.

In fact, some economists believe the slide in consumer confidence may mean a slow economy for the rest of the year. "The second half will not be significantly different from the first half," says Richard Curtin, director of the University of Michigan's consumer surveys.

The Michigan reports, for instance, have found that consumers are already starting to rethink their purchases of cars and homes even though interest rates are favorable. "Now, even though there are some good buys, they think it's better to postpone them," says Curtin.

Although it's still too early for the Federal Reserve's interest-rate cuts to have an impact, analysts say consumers may be holding off on purchases because they're expecting further drops.

Consumers also seem to think the current slowdown is just part of a normal business cycle - not something to panic about. That's the case with Phyllis Simmons, who works for an insurance company in Oklahoma City. She's continuing to invest money in the stock market despite the downturn. "I'm confident that everything will eventually come back," she says.

Still, Simmons, who's heard rumors of coming layoffs at her company, is also cutting back on credit-card use. "We're just trying to keep a livable balance, and hopefully it will be paid off this year."

It's not just the layoffs that are causing consumer retrenchment. Companies are also cutting back on bonuses, which many people use for big-ticket purchases.

"Our bonuses were shocking," says Martha Hudak, who until recently worked in the marketing department of a big Chicago communications firm. Now she has another problem: She was cut in a downsizing move.

Hudak says she is belt-tightening as any unemployed person does. Her expectations mesh with the latest Conference Board report. "Deteriorating business conditions and a less favorable job market are the two critical reasons for the latest decline in confidence," says Franco.

Some 23.3 percent of the 5,000 consumers surveyed expect fewer jobs to be available over the next six months, up from 20.4 percent in March. Fewer consumers are also expecting a raise.

At the same time, consumers are beset with higher prices at the gas pump. Over the past two weeks, gasoline prices have risen 6 to 8 cents a gallon and are still rising.

"It's less dollars in the wallet to buy toys, apparel, or whatever," says Stan Shipley, a senior economist at Merrill Lynch & Co. "This is going to further temper consumer spending going forward."

http://www.nandotimes.com/noframes/story/0,2107,500476434-500731817-504179141-0,00.html

-- Martin Thompson (mthom1927@aol.com), April 25, 2001

Answers

"Many are brown-bagging it with baloney-and-cheese sandwiches. Others are laying off the credit cards. Most are definitely not pulling out the checkbook for expensive vacations or faux 19th-century armoires. Instead, they want to see what's going to happen with their jobs and the economy for the rest of the year."

Someone, somewhere is giving someone a line of BS!!!!!

Housing Strong While Factories Flounder 4/25/01 4:37 pm

Wednesday April 25 11:46 AM ET Housing Strong While Factories Flounder

By Jonathan Nicholson

WASHINGTON (Reuters) - Americans kept plunking down money for new and old homes in March, as the housing sector remained a pillar of strength in an otherwise weak U.S. economy, eports released on Wednesday showed.

While the unexpected resilience of the housing market surprised economists, they said lingering weakkness in the manufacturing sector is likely to keep the Federal Reserve (news - web sites) on track to cut interest rates again when it meets next month.

In separate reports, the Commerce Department (news - web sites) and the National Association of Realtors reported sharp gains in sales of new homes and purchases of existing homes. New home sales rose to a record 1.021 million annual rate, rising 4.2 percent from February's pace. Resales of existing homes gained 4.8 percent to a 5.44 million rate, the second-highest on record.

Both figures were well above what analysts had been expecting, and may raise some questions about the depth of the economy's blues.

``The housing numbers are simply amazing. They are running so counter to everything else we've been seeing in the economic environment,'' said Anthony Karydakis, senior financial economist with BancOne Capital Markets in Chicago.

But economists agreed that the Fed is largely looking past the housing market and is instead focused on the gloomy outlook for manufacturing and capital spending by businesses.

The March report on orders for durable goods, also released Wednesday, did little to brighten that picture. While overall orders advanced 3.0 percent, the gain came strictly from the transportation sector, which is prone to wide swings on a monthly basis. Non-transportation orders were down 1.8 percent.

``Except for a surge in transportation orders, there were few signs that the manufacturing sector is on the way back,'' said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Penn.

-- CAkidd (CAkiidd_94520@yahoo.com), April 26, 2001.