Backing away from the growing sense of optimism they demonstrated in the spring, Americans pulled The Conference Board’s Consumer Confidence Index to its second consecutive decline in July.
The index retreated to 46.6 this month from a revised 49.3 in June.
Both components of the index fell, with the Present Situation Index declining to 23.4 from 25 in June and the Expectations Index decreasing to 62 from 65.5 last month. This year, the high-water mark of the index was May’s 54.8, its highest level since the 61.4 registered in September, when the economic crisis mushroomed.
“Consumer confidence, which had rebounded strongly in late spring, has faded in the last two months,” said Lynn Franco, director of The Conference Board Consumer Research Center, adding that “more consumers are pessimistic about their income expectations, which does not bode well for spending in the months ahead.”
Franco explained the decline in the Present Situation component was due to a worsening job market, while the downtrend in the Expectations Index was due to a higher proportion of consumers who expected no change in business and labor market conditions.
Despite the dip in confidence, the S&P Retail Index rose 0.6 percent, or 2.16 points, to 349.80 Tuesday, inching back toward its high for the year, 356.17, reached Thursday. The Dow Jones Industrial Average had an off day, slipping 0.1 percent, or 11.79 points, to 9,096.72.
“Weak confidence among U.S. consumers feeds doubts for recovery. The early stages of recovery, however, are not based on strong consumer spending. What is more important is stable consumer trends,” said Stephen Gallagher, economist at Société Générale. “The deterioration in views on employment suggests that the unemployment rate has further to rise.”
Gallagher, who noted consumer confidence peaked this year in May, said “limited job opportunities, higher gas prices and the end of President Obama’s honeymoon phase with voters may be behind the recent declines.”
The economist added that the earlier jump in confidence was based on rising expectations. “As those expectations fail to be met by immediate results, consumers may be growing impatient for change,” he concluded.
In July, respondents to the Conference Board’s survey who said jobs are “hard to get” rose to 48.1 percent from 44.8 percent, while those claiming jobs are “plentiful” decreased to 3.6 percent from 4.5 percent.
In addition, the percentage of respondents who expect more jobs in the months ahead decreased to 15 percent from 17.5 percent.
Joining the retail stock advance for the day were The Talbots Inc., up 7.2 percent to $5.22; Saks Inc., 3.2 percent to $5.15, and Limited Brands Inc., 1 percent to $12.47. Among the decliners were American Eagle Outfitters Inc., down 1.5 percent to $14.50; Nordstrom Inc., 1.4 percent to $25.81; Tiffany & Co., 1.2 percent to $28.99, and J. Crew Group, 0.5 percent to $28.39.
Talbots said after the markets closed that Gary Pfeiffer, its independent lead director, had been elected chairman, succeeding Tsutomu Kajita. Pfeiffer, who retired as senior vice president and chief financial officer of DuPont in 2006, joined the retailer’s board in 2004. Kajita, who will continue as a director, is an executive of Aeon Co. Ltd., Talbots’ majority shareholder and a creditor. Trudy Sullivan, president and chief executive officer of Talbots, said the appointment of an independent director as chairman was “in keeping with good corporate governance.”
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