By: Joseph Bonney at jbonney@joc.com.

Business conditions, labor market contribute to decline
Americans' confidence in the economy declined sharply in July for the second straight month, according to a widely watched index released Tuesday.

The Conference Board, a private research group, said its Consumer Confidence Index slipped to 50.4 in July from the revised 54.3 in June, when the index fell 10 points after three months of increases.

“Concerns about business conditions and the labor market are casting a dark cloud over consumers that is not likely to lift until the job market improves,” said Lynn Franco, director of the Conference Baord’s Consumer Research Center. “Given consumers heightened level of anxiety, along with their pessimistic income outlook and lackluster job growth, retailers are very likely to face a challenging back-to-school season.”

Back-to-school sales are second only to the holiday season in importance for retailers, and drive some of the early momentum in the peak shipping season.

Consumer spending accounts for 70 percent of U.S. economic activity. A sluggish housing market, an unemployment level near 10 percent, and a stock market that’s lost most of its gains from early this year have made Americans cautious about spending.

The Consumer Confidence Index -- which measures how shoppers feel about business conditions, the job market and the next six months – hit an all-time low of 25.3 in February 2009. A reading above 90 indicates the economy is on solid footing.

One particular component of the Consumer Confidence Index, which measures how people feel now about the economy now, declined to 26.1, from 26.8. The other barometer, which measures respondent's outlook over the next six months, declined to 66.6, from 72.7 last month.

The Conference Board survey, based on a random survey that was mailed to 5,000 households from July 1 to July 21, showed that consumers' assessment of the job market was more negative than the previous month. Those claiming that jobs are "hard to get" increased to 45.8 from 43.5 percent, while those saying jobs are "plentiful" remained unchanged at 4.3 percent.

Consumers were also more downbeat about future job prospects. Those expecting more jobs in the months ahead declined to 14.3 percent from 16.2 percent, while those anticipating fewer jobs rose to 21.1 percent from 20.1 percent. The proportion of consumers expecting an increase in their incomes declined to 10 percent from 10.6 percent.

Source: The Journal of Commerce

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