NEW YORK — A key barometer of consumer sentiment dropped to its lowest level in two years, igniting concern that the upcoming Christmas shopping season will be lukewarm.
The New York-based Conference Board said Tuesday that its Consumer Confidence Index fell to 95.6 from a revised 99.5 in September. It was the lowest reading since 85.2 in October 2005,when gas and oil prices soared after hurricanes Katrina and Rita pummeled the Gulf Coast. Analysts had expected 99.5.
The report heightens worries for retailers, already bracing for a challenging Christmas shopping season after a disappointing fall. The results also rattled investors and sent the Dow Jones industrial average down 77.79, or 0.56 percent, to 13,792.47.
"Further weakening in business conditions has yet again tempered consumers' assessment of current-day conditions and may very well be a prelude to lackluster job growth in the months ahead," said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement.
The Present Situation Index, which measures how shoppers feel now about the economy, declined to 118.8 in October from 121.2 in the prior month.The Expectations Index, which measures shoppers' outlook over the next six months, declined to 80.1 from 85.0.
Economists closely monitor confidence, since consumer spending accounts for two-thirds of U.S. economic activity.
With Christmas just about eight weeks away, shoppers are contending with a slew of problems: higher food and gas prices, a deepening housing slump and tighter credit, among them.
Sissy Jones, chief executive officer and owner of Sissy's Log Cabin, a jewelry store in Pine Bluff, said she has seen an increase in early holiday shopping.
"I think it's going to be a bigger season," she said. "People are buying nicer things, and there's more on layover."
She said Christmas shopping started in September "more than ever before. We were just shocked this year."
"Americans are wanting instant gratification, and they want pretty things," she said.
"Life is very fleeting and very fast."
Nancy Schuster, one of the owners of the two Beyond Cotton stores in Little Rock, said Christmas shoppers haven't gotten into action yet. She said fall apparel sales have been strong, but if the weather is too warm near Christmas, it could affect consumers' buying.
The store holds its holiday open house Nov. 11, after which she sees more Christmas shoppers, she says.
While the Federal Reserve is expected to cut interest ratestoday to give the economy a bump and entice more investors into the troubled credit markets, economists say the move probably comes too late to benefit the Christmas shopping season, which accounts for up to 40 percent of retailers' annual revenue.
A report on U.S. home prices Tuesday offered little hope that housing prices will recover soon. According to the S&P/Case-Shiller index, U.S. home prices fell nationwide in August for the eighth consecutive month.
For those who watch the economy, the big concern is that the lower home prices, declining consumer sentiment and rising prices for food and fuel will undermine what has been, until now, a healthy job market. The Labor Department is expected to show an increase of 80,000 jobs in October when it releasesits monthly report Friday. Unemployment is expected to remain steady at 4.7 percent.
The Consumer Confidence report, derived from responses through Oct. 23, showed a weakening of confidence in the job market, however.
Those saying jobs are "hard to get" increased to 22.6 percent from 22.4 percent. Those claiming jobs are "plentiful" decreased to 24.1 percent from 25.6 percent in September.
The outlook for the labor market also appeared less optimistic. The percentage of consumers expecting more jobs in the months ahead was unchanged at 13.5, but those expecting fewer jobs increased to 20.1 percent from 18.7 percent.
Information for this article was contributed by Anne D'Innocenzio of The Associated Press and by Laura Stevens of the Arkansas Democrat-Gazette.
Business, Pages 27, 28 on 10/31/2007