After a solid first half, consumer confidence slips

The Conference Board's Consumer Confidence Index (CCI) declined for the fourth consecutive month during September. Following a cumulative loss of almost 16 points between May and August, the composite CCI fell about another point during September. With this latest decline, consumer confidence now appears to be bottoming out at its lowest level since November 2001. With a September 2002 reading of 93.3 on the Conference Board's scale (using consumer confidence in 1985 as an index level of 100), the most recent composite CCI was a modest 3.8% lower than during September 2001. Then again, last September's index had already plunged 15% below the previous month's level, in the wake of the 9/11 terrorist attacks.

The "Present Situation" sub-index of the CCI fell by 4.6 points between August and September and was 29.4% below the still reasonably confident September 2001 index level.

The "Expectations" component (defined as six months out into the future) of the CCI, however, paints a much brighter picture — and provides a continuing hopeful sign that Americans believe that the worst of this downturn is behind us, and that consumer spending will remain resilient. This sub-index was up 1.0% between August and September.

Compared to the dark days of September 2001, the Expectations component has shown remarkable buoyancy — evidence that Americans remain confident that better days are ahead, but also still suggesting that the momentum of the recovery will be painfully slow to build. Consumer expectations — in indexed form, at least — this September were 23.6% more upbeat than they had been a year ago.

Confidence indexes for six of the nine regions in the nation recorded increases between August and September of this year, despite the small decline in the national average measure. The East South Central region (Alabama, Mississippi, Tennessee, and Kentucky) rose sharply for the second month in a row, recording a nation's-best 12.6% increase during September, on top of the previous month's 4.5% gain.

Confidence measures in the Middle Atlantic (+10.8%), West North Central (+9.3%), and Rocky Mountain (+8.1%) regions also rose sharply over the month. Only the East South Central (+7.5%) and the Middle Atlantic (+7.0%) regions continued to record confidence measures this September that were lower than the comparable year-ago figure.

In terms of actual buying plans over the upcoming six months, American households showed significant deterioration over the month. It's clear that the sluggish recovery and heightened concerns about a war with Iraq have combined to cause consumers to hunker down and save — at least in the short term. But in the August survey, 31.3% of households told interviewers that they planned to buy at least one type of major appliance during the upcoming six months.

In September, however, that number plunged to 25.8% — even lower than in the immediate wake of the terrorist attacks.

Consumer more confident six months down the road