US consumers fret about war and jobs

  • Business
  • Thursday, 27 Mar 2003

NEW YORK: The latest snapshot of US consumers has shown that confidence was near decade lows even before the grim realities of war in Iraq invaded TV screens, and that pervasive worries about jobs could stifle any relief rally once the conflict is over. 

Being glued to the news also took a toll on chain store sales last week in what economists have come to call the “CNN effect”, although the long-awaited advent of spring-like weather dragged some from their couches. 

Another report out this week showed that the red-hot US housing market was chilled by the harsh winter weather of February. 

But once again economic news took a back seat to the drama unfolding in Iraq as financial markets were roiled by reports of a popular uprising in the Iraqi city of Basra. 

Equities headed higher on Tuesday after Monday’s rout with the Dow Jones Industrial Average rising 65.5 points or 0.8% to 8,280.23. The S&P 500 gained 10.51 points to 874.74. 

Oil and gold prices eased on the Basra reports, but Treasuries rallied late in the day when the US Senate surprised markets by voting to prune President George W. Bush’s proposed US$726bil tax cut plan to just US$350bil. 

Bond traders have been worried that chopping taxes will inflate an already ballooning budget deficit and lead to ever greater government borrowing. 

The White House has touted the tax cuts as the key part of its economic recovery plans but analysts have always doubted it would provide much real stimulus, at least in the short run. 

The Conference Board’s US consumer confidence index fell to 62.5 in March from 64.8 in February, although such gloomy results have lost much of their impact on markets since consumers have kept spending even while complaining endlessly. 

Still, analysts did note that the Conference Board’s measure of “jobs hard to get” deteriorated yet again, stoking worries that this month’s payrolls report would show little if any recovery from February’s huge 308,000 fall. 

“The end of the Gulf War in 1991 produced a surge in confidence, but labour market conditions quickly diminished the spark. So if history repeats itself, the current job scenario will do little to maintain any post-war surge in confidence,” said Lynn Franco, director of the Conference Board’s Consumer Research Centre. 

The omens were not good. 

Ian Morris, chief US economist at HSBC Securities, noted the Jobs Hard To Get Index rose significantly for the second straight month to hit its highest level since 1994. 

That was consistent with recent poor readings for weekly jobless claims and suggested the unemployment rate could rise to 6% from 5.8% when the March labour report is released next week. – Reuters 


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