By George Anderson
Consumer spending accounts for two-thirds of U.S. economic activity so, when Americans say they are less confident about where the economy is headed and how that might affect their personal circumstances, retailers worry.
The Consumer Confidence Index (CCI) released yesterday saw the reading go from 105.5 in August to 86.6. This represents the single biggest monthly drop since October 1990, which coincided with the beginning of a recession and a spike in gasoline prices brought about by Iraq's invasion of Kuwait and the U.S. mobilizing for the first Gulf War.
The 86.6 number for September is the lowest reading on the CCI since October 2003. At that time, the CCI stood at 81.7.
John Green, president of Lux Bond & Green, a jeweler with nine stores, told the Hartford Courant, "I'd be lying if I said I wasn't concerned. This is something we're looking at all the time."
Donald L. Klepper-Smith, an economist at DataCore Partners, said, "Consumers were spooked when gas hit $3 a gallon. The good news is that things have settled back. But household budgets are stretched thin, and income growth isn't picking up."
Lynn Franco, director of The Conference Board's Consumer Research Center, sees the latest results as a reaction to recent events and expects "more positive levels by year-end or early 2006."
"Historically, shocks have had a short-term impact on consumer confidence," she said.
An Associated Press report said that the latest consumer confidence numbers are more than an emotional reaction to the horrible images broadcast into American homes from New Orleans and other places along the Gulf Coast.
"Even before Katrina slammed into the Gulf Coast on Aug. 29, consumers were struggling to fit higher gasoline prices into their budgets, with that strain showing up in August's modest retail sales gains. Sales have been disappointing again this month, and analysts are concerned that consumers will further retrench when they start paying home heating bills."
Moderator's Comment: Are there legitimate reasons for concern about the economy and the upcoming holiday season for retailers? What can retailers do during periods of low consumer confidence to continue being successful? What should the industry be lobbying political leaders to do, if anything? - George Anderson - Moderator