A key measure of consumer sentiment slipped in December amid persistent anxiety about the job market, an industry group reported Tuesday.
The Conference Board said its consumer confidence index fell to 91.3, following a surge in November to a revised 92.5, its highest level in more than a year. The pullback had been expected, although the numbers released Tuesday were below expectations; analysts had forecast the index would come in at 92.2.
“Job worries continue,” said Lynn Franco, research director for the private research group. “While consumers expect the job situation to improve in the months ahead, until a significant turnaround takes place, consumers’ optimism about current-day conditions will continue to lag behind their expectations.”
Consumer confidence is closely watched because consumer spending accounts for two-thirds of the economy. Consumers who are more confident about the economy’s prospects spend more; those who are pessimistic are more likely to limit their purchases.
Also Tuesday, the National Association of Realtors reported that sales of previously owned homes declined by 4.6 percent in November to a seasonally adjusted annual rate of 6.06 million homes. Still, sales registered their fifth best month on record, a sign that the housing market remains in good shape, and economists predicted the category would set a new record for all of 2003.
Analysts said the pullbacks did not mean the economy recovery was losing momentum.
“This is all part of a softening trend that had to occur because after we got such robust growth in the third quarter — growth that most people would agree was not sustainable,” said Anthony Chan, chief economist at Banc One Investment Advisors in Columbus, Ohio. “I don’t see anything in this that tells me that the recovery is in jeopardy, but I do think we will see a simmering down in the fourth and first quarter.”
Even with December’s decline in consumer confidence, analysts said the outlook appears to be improving.
“I think the report shows some degree of stabilization,” said Parul Jain, deputy chief economist at Nomura Securities International, who noted that a year ago, the consumer confidence index stood at 80.7.
“Expectations are up overall, it’s only the present situation that is still worrisome. On balance, things are looking pretty strong.”
Indeed, while the board’s Present Situation index declined to 73.9 from 81.0, its Expectations index increased to 102.9 from 100.1.
The employment outlook was also higher, with 21.7 percent of those surveyed by the board anticipating more jobs to become available in the next six months. Last month, that figure was 18.5 percent.
The Conference Board report is based on data collected from 5,000 U.S. households. The cutoff for the results was Dec. 16, a day after fugitive fallen Iraqi leader Saddam Hussein was captured and had little effect on the indexes.
Jain said that although Hussein’s capture was a positive for consumer confidence, she believes that the stock and job markets performance were more important.
Saddam’s capture is “icing on the cake but I think it would have marginal impact,” she said.