The Business Roundtable’s economic outlook index dropped to 79.1 in the third quarter from a one-year high of 84.3 in the previous three months, the Washington-based trade group said. Measures greater than 50 are consistent with economic expansion.
Rodney McMullen, president and chief operating officer at Kroger Co., a Cincinnati-based owner of supermarkets, said on a Sept. 15 earnings call that the economy is “fragile.”
“For the last several years, consumer confidence continues to improve but at a slow and steady pace,” he said.
The Fed said yesterday it would maintain its $85 billion a month in bond purchases. The nation’s central bankers said they need to see more signs of lasting improvement in the economy.
“Conditions in the job market today are still far from what all of us would like to see,” Chairman Ben S. Bernanke said at a press conference after the two-day meeting of the Federal Open Market Committee. “The committee has concern that rapid tightening of financial conditions in recent months would have the effect of slowing growth.”
Higher rates have started to take a toll on the housing market, which has been a source of strength for the expansion. Starts of new homes rose 0.9% in August to an 891,000 annualized rate, the Commerce Department said yesterday. The pace remains short of the 1 million annual rate reached in March, an almost five-year high. Building permits, a proxy for future projects, decreased more than forecast.
At the same time, auto sales remain a bright spot of the expansion, possibly reflecting interest-free financing offered by some carmakers. August sales at General Motors Co., Ford Motor CO., Toyota Motor Corp. and Honda Motor Co. all surpassed the most recent analyst estimates.
Motor vehicle purchases climbed 0.9% last month after a 0.5% gain in July, according to the Commerce Department’s retail sales report. Retail purchases minus auto dealerships rose 0.1%, the smallest gain in four months. Five of 13 major categories, including clothing and building materials, showed declines in demand.
Today’s confidence data showed that most demographic groups said the economy is getting worse. The exceptions were men, 18- to 34-year-olds, Democrats and those with incomes exceeding $50,000 a year.
Seniors, or those older than 65, were the most confident age group last week, with a reading of minus 19.8, the highest in almost six years. The data also showed Americans in the South were the least pessimistic since December 2007.
The Bloomberg Consumer Comfort Index, compiled by Langer Research Associates in New York, conducts telephone surveys with a random sample of 1,000 consumers ages 18 and older.
Each week, 250 respondents are asked for their views on the U.S. economy, personal finances and buying climate. The margin of error for the headline figure is 3 percentage points. The percentage of negative responses is subtracted from the share of positive views and divided by three. The most recent reading is based on the average of responses over the previous four weeks.
The comfort index can range from 100, indicating every participant in the survey had a positive response to all three components, to minus 100, signaling all views were negative.