BT: Americans grim about prospects in short term (30 Jul 2008)

Americans grim about prospects in short term

But Conference Board finds outlook brightening slightly

(NEW YORK) Amid the gloom of higher gas and food prices and a slumping housing market, Americans appear to be looking for a bit of hope.

Their outlook has brightened a bit, even though they remain the most gloomy about the current economy that they have been in 16 years, a private research group said yesterday.

The New York-based Conference Board said that its Consumer Confidence Index stands at 51.9 for July - half of what it was a year ago - but the reading was slightly higher than the revised 51.0 in June and a bit better than the reading of 50 predicted by economists surveyed by Thomson/IFR. The improvement, albeit slight, also reverses a six-month slide since February.

'Consumers' assessment of current conditions was little changed, suggesting there has been no significant improvement, nor significant deterioration, in business or labour market conditions,' said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement.

She added, however, that while consumers remain grim about short-term prospects, the modest improvement in their outlook provides some glimmer of hope. The slight improvement in the outlook 'bears careful watching over the next few months', she said.

Economists closely monitor sentiment as consumer spending represents about two-thirds of all economic activity. The reading comes as the nation's retailers are entering the critical back-to-school season, the most important period behind the holiday season.

Stocks rose yesterday, rebounding a day after a big tumble, on the improving confidence. The Dow Jones industrial average rose 111.45, or 1.04 per cent to 11,246.53 in mid-morning trading.

But there was more bad news about housing yesterday. The S&P/Case-Shiller 20-city index fell 15.8 per cent in May from a year earlier, the sharpest drop since its inception in 2000. The narrower 10-city index was down 16.9 per cent, its biggest drop in its 21-year history.

And the Consumer Confidence report - derived from responses received through July 22 of a representative sample of 5,000 US households - showed that consumers' worries about business conditions and jobs aren't going away.

Those saying jobs are 'hard to get' edged up to 30.3 per cent from 29.7 per cent in June, while those claiming jobs are 'plentiful' declined to 13.5 per cent from 14.1 per cent.

Consumers' outlook, while slightly improving from last month, continues to be grim.

Those anticipating business conditions to worsen over the next six months did ease a bit to 32.4 per cent from 33.5 per cent, while those expecting conditions to improve edged up to 9.3 per cent from 8.5 per cent in June. But the percent of consumers expecting fewer jobs in the months ahead increased to 37.1 per cent from 35.7 per cent, while those anticipating more jobs remained virtually unchanged at 8.2 per cent.

Cautious employers, uncertain about the economy and their own sales prospects, have cut jobs each month so far this year. Economists are bracing for more job losses when the government releases the employment report for July on Friday.

Economists expect payrolls to drop by 72,000 in July, which would mark deeper cuts than the 62,000 logged in June. The unemployment rate, now at 5.5 per cent, probably will climb to 5.6 per cent. The jobless rate is expected to keep moving higher this year and next, hitting 6 per cent or more early next year.

The Consumer Confidence survey has a margin of error of plus or minus 2.5 percentage points. -- AP

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