LITTLE ROCK — Consumers are increasingly worried about jobs and the economy, the Conference Board said Tuesday as it reported that its Consumer Confidence Index plummeted in June.
The private research group based in New York said the index dropped almost 10 points to 52.9, down from the revised 62.7 in May.
Economists surveyed by Thomson Reuters had been expecting 62.8 for June.
“Increasing uncertainty and apprehension about the future state of the economy and labor market, no doubt a result of the recent slowdown in job growth, are the primary reasons for the sharp reversal in confidence,” said Lynn Franco, director of the Conference Board’s consumer research center. “Until the pace of job growth picks up, consumer confidence is not likely to pick up.”
June’s reading marked the biggest drop since February, when the index fell 10 points. The index had ris-en for three straight months since then.
Both components of the index - one that measures how consumers feel now about the economy, the other that assesses their outlook over the next six months - dropped. The Present Situation Index decreased to 25.5 in June from 29.8 in May. The Expectations Index declined to 71.2 from 84.6.
Stocks extended their losses after the release of the report. The Dow Jones industrial average fell 268 points and dropped below 10,000.
The Consumer Confidence Index had been recovering fitfully since hitting an all time low of 25.3 in February 2009. Still, June’s reading was far below what’s considered healthy. A reading above 90 indicates the economy is on solid footing; above 100 signals strong growth.
Economists watch the number closely because consumer spending, including on health care and other major items, accounts for about 70 percent of U.S. economic activity.
Economists already had believed that confidence will remain weak for at least another year because of stubbornly high unemployment. But a batch of economic data - from disappointing job figures in May to dismal housing-market numbers - is increasing worries that the road to recovery could be rockier than expected. Amid such concerns, the Dow Jones industrial average has fallen 9.5 percent since late April.
“We’re concerned about the strength of the economic recovery from here,” said Richard Hastings, macro and consumer strategist with Global Hunter Securities.
A key housing index released Friday showed that home prices in April rose for the first time in seven months as government tax credits bolstered the housing market. But the rebound may be short lived now that the incentives have expired. The Standard & Poor’s/Case-Shiller 20-city home-price index released Tuesday posted an 0.8 percent gain. It had fallen in each of the past six months.
A recent batch of housing data released last week signaled a renewed housing slump that may threaten the broader economy. The Commerce Department reported last week that sales of new homes collapsed in May, sinking 33 percent to the lowest level on record as potential buyers stopped shopping for a home as government tax credits expired. That came just after a report showed that sales of previously owned homes fell unexpectedly in May.
The Commerce Department announced Monday that Americans spent a little more in May but not enough to accelerate the economic recovery. Consumer spending rose 0.2 percent last month after no change in April. But personal income was up 0.4 percent, indicating consumers are still wary and choosing to save money.
A key concern is jobs. The Labor Department is expected to report on Friday that employers eliminated 110,000 jobs in June, and the jobless rate is expected to tick up slightly to 9.8 percent from 9.7 percent in May, according to economists surveyed by Thomson Reuters.
In Arkansas, the unemployment rate in May stood at 7.7 percent.
“What we need are consistent job gains, not just a month or two,” said Richard DeKaser, chief economist at Woodley Park Research in Washington, whose confidence forecast was the lowest of those surveyed. “Until we get that, I don’t think we’re going to see any gains in consumer confidence.”
While the confidence report could fuel fears of a “double-dip” recession undercutting U.S. gross domestic product, analysts at RDQ Economics said such worries may be misplaced.
“Confidence has double dipped in the last two recoveries (in early 1992 and early2003) without the economy falling back into recession and the June pullback in confidence is far less severe than either of those two episodes,” according to an RDQ research note. “Furthermore, we think that the response to the oil leak in the Gulf of Mexico is depressing confidence.”
Retailers had a surprisingly solid start to the year as consumers felt better as their stock portfolios rose, but since April, business has slowed. Global Hunter Securities’ Hastings said he believes that the sluggishness continued into June. He believes that sweltering heat in this past month slowed sales of summer’s trendy fashions as consumers stuck to buying the basics to keep cool. He also cited a slowdown in revenue in big-ticket items.
The Conference Board survey is based on a random survey of consumers sent to 5,000 households from June 1 to June 22.
The survey showed that consumers’ assessment of the labor market was less than favorable. Those claiming jobs are “hard to get” increased to 44.8 percent from 43.9 percent, while those saying jobs are “plentiful” decreased to 4.3 percent from 4.6 percent. Consumers polled were also much less optimistic about future job prospects.
Information for this article was contributed by Anne D’Innocenzio of The Associated Press, Ruth Mantell of MarketWatch and Timothy R. Homan of Bloomberg News.
Front Section, Pages 1 on 06/30/2010