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Uncertain Job, Equity Outlook Pushes June Confidence Down

NEW YORK -- The recent barrage of scandalous business practices, the stock market's retreat and uncertain job prospects pushed consumer confidence down four points in June to a four-month low and its biggest drop since after Sept. 11.<P>The...

NEW YORK — The recent barrage of scandalous business practices, the stock market’s retreat and uncertain job prospects pushed consumer confidence down four points in June to a four-month low and its biggest drop since after Sept. 11.

The Conference Board’s monthly reading of consumer confidence, which is based on a representative sample of 5,000 U.S. households, fell to 106.4 in June from an upwardly revised 110.3 in May.

“Weak labor market conditions, generally soft business conditions and waning public confidence in questionable business practices have helped erode consumer confidence,” Lynn Franco, director of the board’s Consumer Research Center, said in a statement.

Still, Franco remained upbeat: “The latest readings point to continued consumer spending and moderate economic growth.”

Economists agreed, saying consumer spending did not completely erode, considering the deep sell-off in the equities markets and unpleasant global developments.

“The monthly decline was not as deep as feared,” commented John Lonski, an economist with Moody’s Investors Services. “The index tells us spending has not fallen off the table.” Backing his point, Lonski said he expects June sales at general merchandisers and retailers to show their biggest increase since February, when sales rose 1 percent.

Spending levels are a crucial factor given consumption accounts for two-thirds of U.S. economic activity.

Still, he warned retailers would be mistaken to think spending would grow as rapidly as it did in 1999 and early 2000. “This is not an index that will make retailers go out and step up their orders, but it is not weak enough to force companies to significantly scale back their exposure to consumer spending,” he said.

Consumers’ assessments of current and future conditions were less favorable in June. The Present Situation Index, the evaluation of ongoing conditions that constitutes half of the overall index, fell 5.5 points to 105.7 in June from 111.2 in May. The Expectations Index, the outlook for the next six months that constitutes the other half, dropped 2.8 points to 106.9 from 109.7.

Those rating conditions as “good” dipped to 20.1 from 21.2 percent. Consumers rating current business conditions as “bad” rose to 19.1 percent from 18.5 percent. Those reporting jobs were “hard to get” increased to 23.1 percent from 21.8 percent, while those claiming jobs were “plentiful” decreased to 20.1 percent from 21.2 percent.

Consumers’ expectations for the next six months were also less optimistic. Those anticipating an improvement in business conditions declined to 23.6 percent from 24.9 percent while those expecting conditions to worsen rose marginally to 7 percent from 6.8 percent.

The public’s perception of the employment outlook for the next six months also weakened. Fewer expect more jobs to become available in the next six months, 20.1 percent in June compared with 21.2 percent in May. Those expecting fewer jobs to become available rose to 14.2 percent from 13.6 percent. And only 20 percent of those surveyed said they expect their incomes to increase over the next six months, down from 21.1 percent in May.”