GAS PRICES, INTEREST RATES COLOR CONSUMER OUTLOOK
Byline: Alison Maxwell
WASHINGTON — With concern over rising gas prices and higher interest rates, the great optimism among American consumers is showing some signs of slipping.
For the first time since October, consumer confidence dipped in February, after hitting an all-time high in January. The Consumer Confidence Index for the month, released Tuesday by the Conference Board, dropped to 141.8 from 144.7 in January.
In comparison, last February’s index measured 133.1. Consumer confidence slumped last October, when it was 130.5, but has steadily risen since then.
Analysts said the drop, primarily a result of rising interest rates brought on by the Federal Reserve Board’s fears of inflation, and gas prices that have been going up steadily since the summer, was expected and doesn’t signal a long-term decline in confidence.
As reported, retailers are already feeling the pinch on shipping costs and are concerned that if gasoline and oil prices continue their sharp incline, it could ultimately effect the price of goods on the store shelves.
“The bottom line is, we’re still at extremely high levels of confidence,” said Larry Horowitz, senior economist with Primark Decision Economics in Boston. “We cannot disregard the impact of this high level and the momentum it brings to consumer spending. We’re at such high levels that it would take quite a bit of worsening to eat into the confidence consumers are feeling right now.”
Lynn Franco, director of The Conference Board’s Consumer Research Center, said: “Consumer attitudes will bear watching over the next few months to gauge the impact of rising interest rates and relatively high gas prices. As for now, the Index is signaling further economic growth ahead.”
Franco said February’s drop was due to declines in consumers’ expectations for the next six months, with the public less optimistic about the short-term business outlook.
The survey’s Expectations Index, which measures consumer confidence for the next six months, dropped to 115.5 in February from 119.1 in January. The percentage of consumers expecting conditions to worsen in the next six months increased to 4.7 percent from 3.5 percent last month.
Only 17.6 percent expect business conditions to get better, down from 20 percent in January.
About 15 percent of those surveyed expect more jobs to become available in the next six months, down from 16.5 in January, while some 25.3 percent expect incomes to increase, down from 26.6 percent in January.
The Present Situation Index, which measures consumers’ immediate economic expectations, dipped to 181.1 from 183.1 last month. Of those surveyed, 46.2 percent described business conditions as “good,” down from 47.3 percent in January. About 8.8 percent said business is “bad,” up from 8.3 percent last month.