Washington, Jan. 17 (Bloomberg) -- U.S. consumer confidence in the economyplunged in January from three months earlier, especially among the lesswealthy, a Bloomberg poll shows. Bloomberg's index of confidence fell to 89.3 in January from 100.4 in October,the last time the survey was conducted, an 11 percent decline. The index wasbased on 1,319 responses to questions on the economy, personal finance andplans for significant purchases. While the poll indicated that a growing number of Americans are pessimisticabout the economy, there were no signs of a deterioration in personal finances.That suggests spending won't slow as much as some economists predict. ``They're just reacting to the negative tone of the economic reports that arecoming out,'' said Richard Yamarone, economist at Argus Research Corp. inNew York. In the past few weeks, several economists have forecast a recessionfor 2001. Morgan Stanley Dean Witter & Co. Chief Economist Stephen Roachsaid the U.S. is already showing signs of recession. The decline in the index follows similar surveys taken in the past two monthsthat show pessimism threatens the U.S. economy's record expansion as itheads toward the end of its 10th year in March. Bloomberg Poll respondents saythe economy will be the second-most important issue facing President-electGeorge W. Bush, behind education.
Income Gap
The overall decline was led by those who earn less than $60,000 in householdincome a year. The confidence of that group fell 13.4 percent since October,while the optimism of survey participants who earn $60,000 or more dropped 1.6percent. The U.S. median household income is about $45,000. Consumer confidence measured by the Conference Board -- a New Yorkresearch group -- fell in December to a two-year low. Consumer sentiment asmeasured in a University of Michigan survey fell last month to its lowest levelsince October 1998. Overall, 31 percent of the poll's respondents say the economy will worsen in thenext 12 months, nearly double the 16 percent who responded that way inOctober. The past 12 months have been more difficult too; 35 percent say theeconomy has worsened, up from 19 percent in October. Most of the loss in the index was generated by overall economic weakness, notchanges in personal financial condition. Forty-four percent said their ownfinances are in good shape now, and the same number said they expect thosefinances to get better in the next 12 months. Only 6 percent said they expecttheir finances to get worse. Those figures were close to those in October'ssurvey.
Survey Methodology
The January survey was conducted from Jan. 9 to Jan. 14 by Princeton SurveyResearch Associates. The margin of error for the survey was 3 percentagepoints. The index's base of 100 was established in September. Confidence about finding a job hasn't dimmed in the past three months, with 58percent saying they're not concerned about losing their job or having their hoursreduced, compared with 60 percent in October. Moreover, survey respondentsare just as confident they could find another job quickly; 59 percent said they're``very confident'' they could do so, versus 62 percent in October. That underlying confidence gives some economists reason to predict theeconomy will continue to expand this year and not fall into a recession. ``The economy is running at full employment, and that really determines whetheryour personal finances are in order or not,'' Yamarone said. Gross domestic product rose at an annual pace of 2.2 percent in the third-quarter, down from a 5.6 percent pace during the prior period. Economistssurveyed by Bloomberg News say fourth- quarter production rose at a 2.7percent pace.
Buying a House
Optimism is supported by some of the poll's findings. More poll respondents thismonth said it's a good time to buy a house, by 65 percent to 57 percent inOctober. There was little change in survey responses in whether now's a goodtime to buy a car even as automakers such as General Motors Corp. and FordMotor Co. cut back on production. The only major purchase that participants called ill-timed is the stock of Internetcompanies. Fifty-two percent say now's a bad time to buy such shares, up from38 percent in October. Thirty- seven percent say it's a bad time to buy stocks ingeneral, up from 26 percent three months ago. The Nasdaq 100 Composite Index, which consists mostly of companiesspecializing in computer and networking equipment, Internet retailing,telecommunications and other technological tools, fell 39 percent last year, andhas fallen 27 percent since the beginning of October.