Consumer confidence, influenced strongly by the Persian Gulf crisis, plunged in January to its lowest level in 10 years, the Conference Board reports.
The private business research organization's Consumer Confidence Index dropped to 54.0 in January, down from the 61.3 recorded in December. The index was set at 100 in 1985. The present reading is only just above that recorded during the bottom of the 1980 recession."Last month's drop in confidence probably can be attributed almost entirely to the crisis in Iraq," said Fabian Linden, executive director of the board's Consumer Research Center. "Survey results recorded in the first half of January were down sharply as last-minute peace negotiations failed."
But after the U.S.-led attack on Iraqi forces Jan. 16, Americans became somewhat more optimistic in their expectations for the immediate future, the board said. Consumer confidence picked up slightly probably because people expected a short war, the board noted.
"A reasonably quick victory might well provide the psychological thrust to invigorate the economy," said Linden.
The monthly survey, which covers 5,000 households throughout the United States, is conducted for the board by National Family Opinion Inc. of Toledo, Ohio.
More than one third of the respondents now consider business conditions to be "bad," Linden said. Also, many are concerned about the U.S. employment situation. One-third of all respondents complained that jobs are hard to find, up slightly from December. Americans also are slightly more concerned than they were in December about job availability in the next six months.
Just 19 percent of survey respondents expect their earnings to rise during the next six months, a drop of more than 3 percentage points since December, the board said.
Buying plans remained soft. Only 5.6 percent of consumers plan to buy a car during the next six months, compared with 6.2 percent in December. Intentions to buy a home are also marginally lower. Plans to buy major appliances are about the same, the board said.