Sharp fall shown in consumer confidence
September 16, 2005
According to the University of Michigan’s consumer sentiment index, the confidence of consumers in the United States fell sharply in early September.
A number of factors played into the decline, including the effects of Hurricane Katrina and rising gasoline prices. The index showed consumer sentiment at 76.9 in September.
This was lower than August’s level of 89.1, and even lower than the 81.8 level reached directly after the terrorist attacks of September 11, 2001. Analysts believe that the current slump in consumer confidence does not indicate the onset of a recession, but is simply the result of a shock and that it will recover soon.
One analyst said that he believes one component of the low index reading is a loss of confidence in the government. Recent polls have shown that support for the Bush administration’s economic policies is fading, and the government has come under fire for its perceived slow response to Katrina’s devastation.
Reports of conditions after the hurricane also highlighted social and economic inequalities in the US which might have contributed to the drop in confidence.
Although analysts emphasized that a drop in consumer confidence does not necessarily mean that consumers will curtail spending, the new numbers still constitute a worry for retailers in the short term.