Consumers' Confidence Shows Signs of Faltering
Comerford, Mike, Daily Herald (Arlington Heights, IL)
Byline: Mike Comerford Daily Herald Business Writer
With Halloween approaching this Thursday, the local economy is looking scarier everyday.
Two major economic indicators came out Tuesday showing consumer confidence has plummeted while retail sales at chain stores has slowed.
With 80 percent of the economy being driven by consumer spending, the news was not good as the Chicago area moves into the key holiday shopping period.
"With numbers like those you have to wonder what is going on these days on Michigan Avenue," said Donald Coxe, chairman and chief strategist, Harris Investment Management, Chicago, referring to Chicago's shopping strip.
"If we see more figures this dramatic we may see the economy sink into a double dip recession, which just last week I would have told you isn't going to happen," he said.
Coxe said the Chicago area may be more vulnerable to a downturn in consumer spending because of its reliance big-ticket spending for items such as homes and cars.
Worries about jobs and a possible U.S. attack on Iraq pummeled consumer confidence to its lowest level in nine years in October, a report said Tuesday, boosting chances the Federal Reserve will cut interest rates next week.
The Conference Board's October Consumer Confidence Index dropped to a nine-year low of 79.4, far below the trough of 84.9 carved after last year's Sept. 11 attacks.
October marked the fifth straight month of losses for the index, which came in well below forecasts for a fall to 89.7.
Most U.S. retailers book about a quarter of their sales during the November-December holiday season and some make the bulk of their profits in that period. But already many retailers are feeling the pinch on profit margins from consumers' aggressive hunt for bargains.
Evidence that spending may cool in the months ahead was seen in a deterioration in consumers' expectations for income gains and employment - the prime drivers behind consumers' ability to spend.
The Present Situation Index, a measure of consumers' attitudes about the economy and their finances right now, plunged to its lowest level since early 1994, to 77. …