Subscribe for 17¢ / day

NEW YORK (AP) – The deteriorating job market and slumping stock prices eroded Americans’ confidence in the economy in July, a private research group said Tuesday.

The New York-based Conference Board said Tuesday that its Consumer Confidence Index slipped to 116.5, down from a revised 118.9 in June. The drop follows two consecutive gains in May and June.

The latest reading came on the heels of a government report that said consumer spending, which has been credited for keeping the economy out of recession, rose a better-than-expected 0.4 percent in June.

Personal income, which includes wages, interest and government benefits, also moved 0.3 percent higher in June, the Commerce Department said Tuesday.

July’s reading marked the first time the confidence index fell since April, when it reached 109.9. Until now, consumer confidence appeared immune to the slumping financial markets, weak corporate earnings, anemic growth and layoffs that have hobbled the economy for nearly a year.

“The biggest issue is probably concerns about their jobs because of all the layoffs we’ve seen in the news lately,” said Mark Vitner, an economist at First Union Corp.

The unemployment rate has climbed from 3.9 percent last October to 4.5 percent in June, when businesses eliminated 114,000 jobs.

Many economists are predicting the July jobless rate will rise to 4.7 percent and that another 38,000 jobs will be cut. The government will release the employment report Friday.

“Consumers and businesses had viewed the current slowdown as nothing more than a bump in the road,” Vitner said. “Now people are concerned it’s a little more than that.”

Nonetheless, the financial markets shrugged off the consumer confidence numbers Tuesday, with the Dow Jones industrial average rising 132 points to 10,534 – more than 10 percent off its all-time high nearly 20 months ago, and the Nasdaq composite index gaining 16 points to 2,033, nearly 60 percent off it’s peak in March 2000.

The Conference Board index, based on a monthly survey of some 5,000 U.S. households, is considered a key indicator because consumer spending accounts for about two-thirds of the nation’s economic activity. The index compares results to its base year, 1985, when it stood at 100.


Copyright © 2001, Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.