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U.S. confidence tumbles
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April 24, 2001: 12:26 p.m. ET
Consumer confidence gauge falls to 109.2 in April, well below forecasts
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NEW YORK (CNNfn) - Consumer confidence fell in the United States in April after rising briefly in March, a research group said Tuesday, pointing to continuing weakness in the world's largest economy.
The Conference Board, based in New York, said its monthly index of consumer confidence tumbled to 109.2 in April from March's revised reading of 116.9, hurt by deteriorating business conditions and worries about job security. Wall Street economists had forecast a reading of 113.0.
Confidence rose in March but still is well below its peak levels of last summer. The latest drop takes the index back to its February level and could indicate a delay in any rebound in U.S. growth, since consumer spending fuels about two-thirds of the nation's economy.
"Deteriorating business conditions and a less-favorable job market are the two critical reasons for the latest decline in confidence," said Lynn Franco, director of the Conference Board's Consumer Research Center. "It's clear that consumers have begun to worry about employment trends, and these concerns are gnawing away at consumer confidence."
Economy growing at snail's pace
Consumer confidence has fallen as the U.S. economy has slowed to a snail's pace, turning in a 1-percent growth performance in the fourth quarter of 2000, the weakest performance in 5-1/2 years and well below the 5.6-percent rate it hit last spring.
The slowdown also has had an impact on corporate earnings, leading to a tumble in U.S. equities markets. The Nasdaq composite index has struggled in recent months to regain the 2,000-point level after soaring above 5,000 in March 2000.
As the economy has slowed and stock prices have shrunk, job cuts also have risen at an alarming rate. Networking equipment maker JDS Uniphase Inc. (JDSU: down $2.20 to $21.98, Research, Estimates) announced Tuesday it is cutting 5,000 jobs, a day after Minnesota Mining & Manufacturing Co. (MMM: up $0.82 to $117.12, Research, Estimates), popularly known as 3M, the maker of Scotch tape, announced 5,000 job cuts of its own.
At the rate they're going in April, in fact, U.S. companies should match the 150,000 job cuts announced in March, capping a dismal four-month period in which more than half a million job cuts were announced.
Consumers wary
The April drop simply reflects consumer uncertainty about their own financial and job security in such an environment, economist Joel Naroff said.
"What we're seeing is the delayed impact of the movement from hearing about layoffs to the actual layoffs, and ultimately that effect on households, which are beginning to see some people lose their jobs," said Naroff, of Naroff Economic Advisors in Holland, Pa.
"It doesn't indicate that households are going to dramatically start cutting back spending, but this does tells us that consumption, at least in this quarter, isn't going to be that great," Naroff said.
Steven Wood of Financial Oxygen was less sanguine, saying the confidence data is "comparable to the beginning of recessions."
"Only lower interest rates are providing any support at the moment," Wood said. "The outlook is still worrisome."
The Conference Board said the survey of about 5,000 U.S. households was taken before the Federal Reserve cut interest rates last week. The cut, the fourth this year and part of an ongoing effort to prevent the United States from slipping into recession, could possibly have lifted consumer confidence after the survey.
U.S. markets rose modestly after the release of the report, with the Dow Jones industrial average up 8.58 points to 10,540.81 and the Nasdaq composite index up 6.15 points to 2,065.47. 
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