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Sour Consumer Mood Raises Holiday Shopping Worries

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By ANNE D'INNOCENZIO, The Associated Press

Published: October 31, 2007

NEW YORK - With Christmas only about eight weeks away, shoppers are feeling more forlorn about the economy than they have since hurricanes Katrina and Rita battered the Gulf Coast two years ago.

The New York-based Conference Board said Tuesday that its Consumer Confidence Index fell to 95.6 from a revised 99.5 in September. It was the lowest reading since 85.2 in October 2005 when gas and oil prices soared after the hurricanes deluged New Orleans and shut down a large chunk of the nation's oil refineries. Analysts had expected a reading of 99.5 Tuesday.

For retailers, the consumer confidence report, which showed its third monthly decline in a row, heightens worries that the holiday shopping season will be challenging after a disappointing fall. For investors, it raised concerns that consumers' growing wariness was another sign the economy may be slowing too much. Consumer spending accounts for two-thirds of U.S. economic activity.

The report helped nudge stocks lower as Wall Street waited warily for a decision on interest rate policy from the Federal Reserve, which met Tuesday and again today. The Dow Jones industrial average dropped 55.84, or 0.40 percent, to 13,814.42.

Souring confidence is 'certainly not what retailers want to see going into the holiday season,' said Wachovia Corp. economist Mark Vitner. He added consumers have more hurdles going into the season than even two years ago.

The Present Situation Index, which measures how shoppers feel now about the economy, declined to 118.8 in October from 121.2 in the prior month. The Expectations Index, which measures shoppers' outlook during the next six months, declined to 80.1 from 85.0.

Shoppers are contending with a slew of problems: higher food and gas prices, a deepening housing slump and tighter credit.

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