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Consumers show pessimism again

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NEW YORK — Worries about job prospects sent consumer confidence to a seven-month low in October and its third consecutive monthly decline. The steeper-than-expected drop raised questions about whether consumers will be in the mood to spend during the critical holiday shopping season.

The Consumer Confidence Index dropped 3.9 points to 92.8, down from a revised 96.7 in September, according to a report Tuesday from The Conference Board, a private research group. Analysts had expected a reading of 94.

The October figure is the lowest since March, when the reading was 88.5. The index had been rising since April, before falling 3 points to 98.7 in August and another 2 points in September.

"Subdued expectations, as opposed to eroding present-day conditions, were the major cause behind October's decline in consumer confidence," said Lynn Franco, director of The Conference Board's Consumer Research Center. "And, while consumers' assessment of the labor market this month showed a moderate improvement, the gain was not sufficient to ease concerns about job growth in the months ahead."

Economists closely track consumer confidence because consumer spending accounts for two-thirds of all U.S. economic activity.

The Expectations Index, one component of the Index that measures consumers' outlook over the next six months, declined to 92.0 from 97.7. Meanwhile, The Present Situation index dipped to 94.2 from 95.3.

The Conference Board's gauges are derived from responses received through Oct. 19 to a survey mailed to 5,000 households in a consumer research panel. The figures released Tuesday include responses from at least 2,500 households. The figures for September were revised after all the surveys for that month were tabulated.

Michael P. Niemira, chief economist at the International Council of Shopping Centers, said it is unclear whether the decline shows a "real deterioration" in confidence or was a political statement in advance of next week's presidential election.

Deteriorating job expectations "could be tied to a vision of what the economy might be six months down the road, shaped by how effective Senator Kerry's message is — whether you agree or not," he said. Democrat John Kerry is challenging President Bush.

In that case, he said the report would be less worrisome for the holiday season or for the overall economy.

But if the decline in consumer confidence is indicative of a "real deterioration," then it is a troubling sign for the holiday season, he said.

Earlier this month, the nation's largest retailers reported their fourth straight month of tepid sales in September. High gasoline prices and grocery bills and ongoing job insecurity prompted many consumers to again limit their spending.

Still, economists believe merchants are in a better position than a year ago, when consumer confidence measured 81.7 in October 2003.

Economists are awaiting October job figures from the Labor Department, due out Nov. 5. Analysts are expecting the nation's nonfarm payrolls to add 160,000 jobs. The country added a lower-than-expected 96,000 jobs in September as the unemployment rate held steady at 5.4 percent.

"The labor market is not doing well at this part of the cycle, and that is the main factor driving consumer spending," said Oscar Gonzales, economist at John Hancock Financial Services.

The consumer confidence report showed that consumers' assessment of overall current conditions was mixed. Those saying business conditions are "good" declined to 21.7 percent from 23.4 percent. Those saying conditions are "bad" edged up to 21.4 percent from 20.4 percent. On the employment front, consumers saying jobs are "plentiful" increased to 17.4 percent from 16.6 percent, while those claiming jobs are "hard to get" eased to 27.8 percent from 28.0 percent in September.

Stock prices rose on Tuesday. The Dow Jones industrial average gained 138.49, or 1.42 percent, to 9,888.48. The Standard & Poor's 500 index was up 16.29, or 1.49 percent, at 1,111.09. The Nasdaq composite index added 14.75, or 0.77 percent, to 1,928.79.