Consumer Confidence Plummets

graphic on Consumer Confidence in the Economy
Consumers have grown extremely wary as the United States inches closer to war with Iraq, driving down their confidence in the economy to its lowest level in nearly a decade, a private research group said Tuesday.

The Consumer Confidence Index plummeted to 64.0 in February from a revised 78.8 in January — a drop of nearly 15 points, the Conference Board said. That is the lowest reading since the index hit 60.5 in October 1993.

The latest index reading is far below analysts' expectations of 77.0 for February.

"Lackluster job and financial markets, rising fuel costs, and the increasing threat of war and terrorism appear to have taken a toll on consumers," said Lynn Franco, director of the Conference Board's Consumer Research Center.

"The market is telling us that Iraq is a huge albatross," Liz Ann Sonders, Chief Equity Strategist at Charles Schwab, tells CBS News Correspondent Anthony Mason.

"Until we get a resolution, it's not going to help the stock market and related to that it's not going to help the economy," says Sonders.

Ordinary investors are worried as well.

"I don't have good feelings about it at all. In fact, I'm here to take my money out of stocks." Says Margaret Jelcich.

Jelcich was moving her retirement money into less risky investments.

"I have no confidence that the market is gonna go up," she says.

Two related indices the Conference Board tracks monthly also plunged.

The Expectations Index, intended to measure sentiment about conditions in the next six months, fell to 65.6 from 81.1 a month ago, while the Present Situation Index dropped to 61.6 from 75.3.

"This month's confidence readings paint a gloomy picture of current economic conditions, with no apparent rebound on the short-term horizon," Franco said.

On Wall Street, the markets sank a bit shortly after the report was released, but quickly regained their earlier levels. In midmorning trading, the Dow Jones industrial average was off 103 points at 7,755, while the Nasdaq composite index was down 20 points at 1,302.

As part of the Present Situation Index, consumers who rated current business conditions as bad rose to 30.7 percent from 26.7 percent. The number who said business conditions are good declined to 13.2 percent from 15.0 percent.

And consumers aren't pinning much hope on the economy getting better in the next six months.

Those surveyed who believe business conditions will turn even more sour increased to 19.0 percent from 14.0 percent. The percentage of consumers who believe conditions will improve dropped to 15.3 percent from 17.7 percent.

The number of consumers who said jobs are hard to get rose to a 9-year high of 30.1 percent from 28.9 percent, while those who said there are plenty of jobs decreased to 11.2 percent from 14.5 percent. Looking six months down the road consumers were more pessimistic, with the number saying they expect there to be fewer jobs available jumping to 28.4 percent from 21.2 percent. The number expecting more jobs fell to 12.7 percent from 14.2 percent.

The consumer confidence index is based on a survey of 5,000 U.S. households and compares to its base of 100 in 1985.

As Mason reports, so far the impact may be mostly psychological, but Iraq has made the stock market and the economy prisoners of war.