U.S. consumer confidence may have fallen during August from a two-year high after oil prices climbed to record levels and job growth slowed, economists said in advance of a private survey today. A separate report on Chicago-area manufacturing may point to a slower pace of growth. The Conference Board's index of consumer sentiment is forecast to drop to 103.5 for this month from 106.1 in July, according to the median estimate of 56 economists in a Bloomberg News survey. The statistics are scheduled for release at 10 a.m. Washington time.
Even with the decline, consumer confidence would mark its third straight month above 100, the first time that's happened in more than two years. The drop may have been restrained as crude- oil prices retreated from a record high set Aug. 20 and on expectations that the government this week may report the first acceleration in the job market in five months. ``Modest declines in consumer attitudes suggest that individuals were not intimidated by high energy prices,'' said Michael Moran, chief economist at Daiwa Securities America Inc., before the report. ``We continue to expect households to provide support for the expansion, as fundamentals remain generally sound for consumer spending.'' The National Association of Purchasing Management-Chicago's regional manufacturing index may have declined to 60 for the month from 64.7 during July, according to the median of economists' forecasts. Readings above 50 point to growth.
The price of a barrel of crude oil reached $49.40 in New York futures trading Aug. 20, and the Labor Department reported Aug. 6 that U.S. employers added 32,000 jobs last month, the smallest gain this year. The U.S. may have added 150,000 jobs this month, based on the forecast for Friday's report.
Confidence and Spending
``If jobs begin to rebound, sentiment will also likely improve,'' said Steven A. Wood, president of Insight Economics in Danville, California. ``Faster job creation will not only boost consumer sentiment but also lift income growth and consumer spending.'' The link between confidence and consumer spending isn't always direct. Carl Steidtmann, chief economist at Deloitte Research, says spending is more closely tied to incomes. A 1998 study by the Federal Reserve Bank of New York finds that responses to questions in the Conference Board survey on job prospects have the most power to predict spending. The Commerce Department reported yesterday that consumer spending rose 0.8 percent in July and incomes rose 0.1 percent. The June decline in spending was revised to 0.2 percent from 0.7 percent. The increase in incomes was the smallest since November 2002, and reflected a slowdown in government payments.
Discounters
Consumer spending grew at a 1.6 percent annual rate during the April-June quarter, the slowest pace in three years, a report Friday from the department showed. ``Consumers need some reason to feel confident about the economy before they are ready to start buying,'' said Joe Cooper, chief financial officer at Big lots Inc., the Columbus, Ohio, company that is the largest U.S. retailer of discontinued and overstocked goods, in an interview. ``There's been a turnaround for the high-end demographic retailers, but discounters are still seeing softness.''
The New York-based Conference Board's report on consumer confidence is based on a survey of 5,000 households. The measure has averaged 95.7 for the first seven months of 2004, up from 79.8 for all of 2003. Economists said an improved jobs forecast and the retreat in energy prices may help restrain the decline. ``Peoples' assessments of the job situation in August is still a lot better than it was in April or May,'' said Stephen Stanley, chief economist at RBS Greenwich Capital Markets in Greenwich, Connecticut.
Fuel Prices
Crude oil futures in New York plunged 7.6 percent last week, the biggest weekly decline in a year, on reduced concern that supplies from Iraq will be disrupted because of unrest. Retail gasoline prices have averaged $1.92 a gallon this month, down from $1.95 in July, according to figures from the U.S. Energy Department. ``It could have been worse if gas prices had risen as much as oil prices,'' said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. ``If oil prices continue to fall, we'll be in better shape by the fourth quarter.'' The confidence figures are being released as Republicans hold their convention in New York to nominate President George W. Bush as the party's candidate.
A public opinion survey finds the presidential candidates about even. A Time magazine poll conducted Aug. 24 to Aug. 26 found that 46 percent of registered voters considered that Democrat John Kerry, the four-term U.S. senator from Massachusetts, would do a better job than Bush managing the economy. Forty-three percent said Bush would do a better job. Bush was the preferred candidate of 46 percent of respondents, compared with 44 percent for Kerry and 5 percent for independent Ralph Nader, in the telephone survey of 1,206 people. The poll had a margin of error of 4 percentage points. ///www.bloomberg.com