U.S. Consumer Confidence Probably Slumped as Stocks Plunged

By Shobhana Chandra

Oct. 28 (Bloomberg) -- U.S. consumers probably turned more pessimistic in October as stocks plunged and banks shut off credit, raising the risk spending will tumble, economists said before reports today.

The New York-based Conference Board's index of consumer confidence slid to 52, one point shy of the 16-year low reached in June, according to the median forecast in a Bloomberg News survey. Another report may show a record drop in home prices in the 12 months ended in August.

Household wealth has evaporated as the Standard & Poor's 500 index verged on its worst one-month loss in 70 years, home equity shrank and job losses mounted. The dimming outlook signals consumer spending, which accounts for more than two-thirds of the economy, will deteriorate, deepening the U.S. slump.

``Things aren't looking good for the consumer this month,'' said Maxwell Clarke, chief U.S. economist at IDEAglobal in New York. ``There's anxiety from the financial crisis coupled with weaker numbers on the economy. People are just reluctant to spend.''

Forecasts for the confidence index ranged from 45 to 56.6 in the survey of 66 economists. The gauge registered a reading of 59.8 in September and averaged 103.4 last year. The report is due at 10 a.m. New York time.

The S&P/Case-Shiller home-price index, due at 9 a.m., may show values in 20 metropolitan areas declined 16.6 percent from August 2007, the biggest year-over-year drop since records began in 2001. The gauge has fallen every month since January 2007.

Mounting Foreclosures

The housing slump is likely to extend well into a fourth year as foreclosures put more properties on the market and drive down prices even more.

The confidence figures would corroborate declines seen in other measures. A report earlier this month showed the Reuters/University of Michigan preliminary index of consumer sentiment decreased in October by the most on record.

The Conference Board's index tends to be more influenced by attitudes about the labor market, economists said.

The economy lost jobs for nine consecutive months through September, bringing the total drop in payrolls to 760,000 this year, Labor Department figures showed. Some economists anticipate job losses accelerated in October.

Consumer spending probably dropped last quarter by the most in almost two decades, economists forecast a Commerce Department report will show in two days. As a result, the economy probably shrank from July to September, the survey showed.

The slump in spending may be even bigger this quarter as consumers retrench. The International Council of Shopping Centers predicts the November-December holiday season, which brings in more than a third of some retailers' annual sales, will be the weakest since 2002.

The credit freeze ``impacted consumers' attitudes,'' Farooq Kathwari, chief executive officer of home-furnishings retailer Ethan Allen Interiors Inc., said in a Bloomberg Television interview this month. ``People are cautious, people are holding back.''

Bloomberg Survey

=============================================
                         Case Shil Consumer
                           Monthly     Conf
                              YOY%    Index
=============================================

Date of Release              10/28    10/28
Observation Period            Aug.     Oct.
---------------------------------------------
Median                      -16.6%     52.0
Average                     -16.6%     51.7
High Forecast               -15.9%     56.6
Low Forecast                -17.1%     45.0
Number of Participants          27       66
Previous                    -16.4%     59.8
---------------------------------------------
4CAST Ltd.                  -16.7%     48.0
Action Economics              ---      53.0
AIG Investments             -16.3%     50.0
Aletti Gestielle SGR          ---      50.5
Argus Research Corp.          ---      54.0
Banc of America Securitie     ---      48.5
Bank of Tokyo- Mitsubishi     ---      50.0
Bantleon Bank AG              ---      54.0
Barclays Capital              ---      52.0
BMO Capital Markets         -16.6%     51.0
BNP Paribas                   ---      51.0
Briefing.com                  ---      52.0
CIBC World Markets            ---      53.0
Citi                          ---      52.0
ClearView Economics         -16.7%     ---
Commerzbank AG                ---      50.0
Credit Suisse                 ---      50.0
Daiwa Securities America      ---      53.0
Danske Bank                   ---      55.0
DekaBank                    -16.7%     51.0
Desjardins Group            -15.9%     52.0
Deutsche Bank Securities      ---      53.0
Deutsche Postbank AG          ---      53.0
Dresdner Kleinwort          -16.5%     53.0
DZ Bank                     -16.5%     53.0
First Trust Advisors          ---      48.6
Fortis                      -16.2%     50.0
Goldman, Sachs & Co.          ---      49.0
H&R Block Financial Advis     ---      54.0
Helaba                        ---      53.0
High Frequency Economics    -16.5%     50.0
IDEAglobal                  -16.5%     52.0
Informa Global Markets        ---      56.0
ING Financial Markets       -16.9%     52.0
Insight Economics             ---      52.0
J.P. Morgan Chase           -17.0%     52.0
Janney Montgomery Scott L   -16.2%     52.5
JPMorgan Private Client     -17.0%     52.0
Landesbank Berlin             ---      55.0
Landesbank BW               -16.5%     51.0
Maria Fiorini Ramirez Inc     ---      52.0
Merk Investments            -16.5%     53.0
Merrill Lynch               -16.6%     54.0
MFC Global Investment Man     ---      51.0
Moody's Economy.com           ---      50.0
Morgan Stanley & Co.          ---      52.5
National City Corporation     ---      56.6
Natixis                     -16.9%     50.0
Newedge                       ---      54.0
Nord/LB                       ---      49.0
Okasan Securities           -16.6%     ---
RBS Greenwich Capital         ---      50.0
Ried, Thunberg & Co.          ---      54.0
Schneider Trading Associa   -17.1%     49.0
Scotia Capital              -16.6%     51.0
Societe Generale              ---      52.0
Stone & McCarthy Research     ---      52.0
TD Securities                 ---      52.0
Thomson Financial/IFR         ---      50.0
Tullett Prebon                ---      52.0
UBS Securities LLC          -16.6%     50.0
Unicredit MIB               -16.8%     54.0
University of Maryland      -16.6%     55.0
Wachovia Corp.                ---      48.5
Wells Fargo & Co.             ---      50.0
WestLB AG                   -16.6%     52.5
Westpac Banking Co.         -16.5%     45.0
Wrightson Associates          ---      55.0
=============================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net