http://www.boston.com/dailynews/303/nation/Consumer_confidence_index_drop:.shtml

Consumer confidence index drops to 7{-year low

By Lisi De Bourbon, Associated Press, 10/30/2001 15:29

NEW YORK (AP) Consumer confidence plunged in October to its lowest level in 7½ years as the Sept. 11 terrorist attacks and anthrax fears sapped Americans' optimism about job security and the economy.

The Conference Board said Tuesday that its Consumer Confidence Index had dropped to 85.5 from 97 in September, well below the 96 analysts had predicted.

''We obviously expected consumer confidence to be shaken, but not this badly,'' said Oscar Gonzalez, an economist at John Hancock Financial Services in Boston. ''This is a very worrisome report.''

Stocks moved lower on the news. In afternoon trading, the Dow Jones industrial average was off 140 points, or 1.5 percent, to 9,130, while the Nasdaq composite index was down more than 25 points, or 1.5 percent, to 1,674.

The index, based on a monthly survey of some 5,000 U.S. households, is closely watched because consumer confidence drives consumer spending, which accounts for about two-thirds of the nation's economic activity.

The index compares results to its base year, 1985, when it stood at 100. The October figure is the lowest since February 1994.

Consumer spending has been one of the main factors preventing the economy from sliding into recession. But many economists now believe a recession is inevitable after the terrorist attacks.

Companies have slashed hundreds of thousands of jobs since then. They had been trimming payrolls long before the attacks in response to an economic slowdown that weakened earnings and sent stock prices lower.

To help revive the economy, the Federal Reserve has cut interest rates nine times this year, with two reductions coming after the attacks. A 10th cut is expected when policy-makers meet next month.

Analysts were surprised by the consumer confidence news because the University of Michigan reported last week that consumer sentiment had increased slightly in October. The Conference Board said its survey is more closely tied to the labor market than other reports.

Analysts also suggested reports about anthrax infections, the threat of more terrorist attacks and U.S. military action in Afghanistan are darkening consumers' moods.

On the Net: http://www.conferenceboard.org

-- Anonymous, October 30, 2001