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American Morning
America's New War: Latest Government Figures on Consumer Confidence Not Good
Aired September 25, 2001 - 10:03 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA ZAHN, CNN ANCHOR: About a half hour since the opening bell rang on Wall Street, but the knee-buckling blow may have just landed a few seconds ago. The government has just released its latest figures on consumer confidence. The news is not good.
CNN's economics correspondent Kathleen Hays joins with us more from the CNN Financial News desk here in New York.
Good morning.
KATHLEEN HAYS, CNN ECONOMICS CORRESPONDENT: Good morning.
ZAHN: Well, actually, it's not such a good morning, is it?
HAYS: Well, you know, we hate to give bad news, but you know, we have to tell it like it is. And again, the conference board, which is a New York-based organization, does a high profile survey every month. They have been doing it for decades. They send out a questionnaire to some 5,000 households. Their index fell to 97.77 from 114 in September.
Look at the steepness of this drop. This is going back to the last recession. Now you can see, I guess the good news would be that we're still above the levels that we saw in the last recession, and one of the things that makes this maybe look worse than it is, is that we were at very high levels. We were supremely confident in the last couple of years when the stock market was soaring, when the economy was strong.
The thing is now, we are sliding into recession. That's the view of most economists. Most say we are already in recession. In fact, the present index fell sharply to 125 from 144. And people's view of the future doesn't look so good either. That index falling sharply to 79, from 93.7.
The problem with expectations, Paula, is that they can be self- fulfilling. If we think things are going to be bad, we may be more conservative in our spending, we may save our money, rather than shopping, so this is a worry. In fact, the Conference Board itself, Lynn Franko, who is the director of their consumer confidence work, says that up until now, the consumers held the economy up pretty well. The problem is, we cannot count on the consumer now to keep us out of recession. And the other thing, Paula, They ask people about jobs plentiful or hard to get. The number of people saying jobs are hard to get rose sharply. Fewer people see jobs plentiful both in the present and in the future. And when you talk to people about what really drives spending, is it the stock market? Well, they say it is jobs. They say that if you are confident in your job, you are more likely to buy a house, buy a car. When you start getting worried, that's when you start backing off.
ZAHN: There was bad news from Federated yesterday, and you talk about this being a self-fulfilling prophecy with consumers. You talk to any retailers out there, and they say basically what they are doing now is buying less, flattering people, I'm not saying Federated in particular, but firing people because they can't justify keeping people on staff when they are not selling clothes, and then there is a trigger effect to all of that.
HAYS: And another problem with that, this is the time of year when retailers are supposed to make the biggest sales. This is when they really make their money. There is a weekly survey done by bank of Tokyo Mitsubishi. They survey about 70 or 80 chain stores across the country. Last week, the weeks of the attacks, that index fell sharply. In fact, the day of the attacks, it fell about 50 percent.
ZAHN: That should come as no surprise.
HAYS: Exactly. The week it was down about 1 1/2 percent. The week following the attacks it's down point .8 percent. That's quite a negative, but not quite as bad. And retailers are still keeping their fingers crossed, and they are hoping people, especially outside the New York region, will start shopping again, and hopefully people will get on with lives and resume their routine.
ZAHN: Whoever thought the new mantra would be shop, shop, shop. You heard that coming from Senator Pete Domenici over the weekend, the president, and...
HAYS: Gives us some justification, doesn't it?
ZAHN: Yes, not like we need it.
HAYS: Thank you, Kathleen, very much.
The news, not unexpected, sends an icy chill through markets that had appeared to be warming up from yesterday. For a closer look now, we turn to CNN's Bill Hemmer, who is outside the Nasdaq marketsite in Times Square.
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