Consumers Rightfully PessimisticBy H.J. Cummins
Still glum about job prospects, Americans remain pessimistic about the economy, according to the August measure of consumer confidence released Tuesday by The Conference Board.
And there is reason for their pessimism, according to the Commerce Department's measure of the nation's economy, revised Tuesday for the April-June quarter. Although the annualized growth rate of the gross domestic product -- the sum of all goods and services produced within U.S. borders -- was slightly higher than previously estimated, it still languished at an uninspiring 1.8 percent.
"You have to acknowledge that 1.8 percent is still a very weak number," said Roger Shields, senior economist at Chemical Bank in New York. "It's better than the first quarter's 0.8 percent but ... we're feeling grateful for small favors. The numbers are not good. They don't reflect a strong economy. And I think you still have very worried consumers."
The Conference Board, a New York-based business research group, cited job fears as central to consumer pessimism. Twice as many respondents expect fewer jobs in the next six months as expect more jobs. That's among the 5,000 households polled nationwide.
The consumer confidence index registered 59 in August, about the same as in July and identical to last August -- but a full 18 points below January's figure. The index sets the year 1985 as 100.
Government adjustments to the second-quarter gross domestic product showed sharper deterioration in the U.S. trade balance, and analysts largely blamed the weak economies of the biggest U.S. trading partners, Europe, Japan, Canada and Mexico. Also adjusted down was consumer spending, which accounts for about two-thirds of economic activity.
On the other hand, government spending rose, and analysts credited state and local construction projects. Also, business inventories rose $13.9 billion in the quarter instead of the $6.3 billion initially estimated.
"But you can't feel awfully good about something that results in a big buildup of inventories," Shields said, because big supplies of goods now mean less work ahead for producers.
The Commerce Department also revised its quarterly gross domestic product figures back to 1990. The new numbers generally show that the 1990-91 recession was less severe than first measured and the recovery last year was stronger.
The most striking revision was for last year's final quarter, with the annualized growth rate raised from 4.7 percent to 5.7 percent. Analysts said consumer spending surged as higher-income Americans shifted bonuses and other early 1993 earnings into the quarter to avoid the tax increase they expected this year.