Consumer confidence tumbles

Tuesday, Feb. 24, 2004 | 9:12 a.m.

BLOOMBERG NEWS

NEW YORK -- Consumer confidence in the U.S. economy fell the most this month since the start of the Iraq war as Americans became more gloomy about job prospects, a report by a private research group showed today.

The New York-based Conference Board's sentiment index for February dropped to 87.3, the lowest since October, from a revised 96.4 in January. The decline was the biggest since a 14- point decrease in February 2003, a month before the start of fighting in Iraq. Optimism about both current and future conditions fell for the first time since September.

"Consumers remain disheartened with current economic conditions, and at the core of their disenchantment is the labor market," said Lynn Franco, director of the Conference Board's Consumer Research Center. "The pace of job creation remains too tepid to generate a sustainable turnaround in consumers' confidence."

The economy has created jobs at a rate of 73,000 a month since September, a third of the average during the 10-year expansion from 1991 to 2001. Since President George W. Bush took office, employment has declined by 2.3 million jobs.

Bush's approval rate has dropped to a low of 50 percent, with more than half of adults saying they were displeased with his handling of the economy, an ABC-Washington Post poll released last week showed.

"Jobs are important not just for the overall level of confidence, but they are important for the incumbent party in an election year," said Anthony Chan, chief economist at Banc One Investment Advisors in Columbus, Ohio. He had forecast the index would drop to 87.

" As the realization hits that the job market isn't going to join the party, consumer spending will lag overall economic growth," Chan said. "The refund checks will help salvage a bad situation and make it not as bad. The refunds certainly are going to be an important crutch for a bad situation."

Tax refunds and lower tax payments will boost household incomes by about $70 billion over the first six months of the year, according to research from economists at Credit Suisse First Boston in New York.