Consumer confidence punges to a two-year low

This is from CBS Marketwatch:

WASHINGTON (MarketWatch) -- U.S. consumer confidence declined to its lowest level in nearly two years in September as a weaker job market and uncertain business conditions increased concern about the outlook, the Conference Board said Tuesday.

The consumer confidence index fell to 99.8 in September from a revised 105.6 in August, the research group reported. This is the lowest level since November 2005.

The drop was larger than expected. Economists surveyed by MarketWatch had been expecting the index to fall to 103.8 from the initial estimate of 105.0 in August. See Economic Calendar.

Confidence was at a 6-year high in July, but has plunged since. This is the biggest two-month drop since Katrina.

[....]

Economists were surprised by the decline in confidence in part because other measures of consumer confidence had held fairly stable early this month.

They noted that confidence remains 20 points above recession levels, but said the drop in confidence does point to slower spending in the fourth quarter.

Lynn Franco, director of the Conference Board's consumer research center, said "looking ahead, little economic improvement is expected, and with the holiday season around the corner, this is not welcome news."

You can bet that it is not welcome news here. American consumers are looking at this home mortgage mess, the weakened job market, and perhaps even the worsening political conditions and even the war in Iraq, and they are getting worried. And when consumers are getting worried at the bevy of bad news that has been coming out in this country, they may just start to cut their spending on goods and services. Of course, the economists in this CBS Marketwatch story are saying that the consumer confidence levels "remains 20 points above recession levels," but they fail to neglect that confidence has taken a serious plunge here. It may continue to plunge 20 points into the recessionary levels if economic and political conditions continue to deteriorate. Continuing into this CBS Marketwatch story;

A separate survey by the International Council of Shopping Centers and UBS Securities said chain-store sales for the week ended Sept. 22 fell 1% on a week-over-week basis.

"The industry continues to struggle on a weekly basis as performance was uneven by retailer with some market share shifting between retailers," said Michael Niemira, chief economist for the ICSC.

"We often say that it is more important to watch what consumers do than what they say. But gloomy reports from Target and Lowe's this week suggest that consumers have become more cautious. So in this case the signal from sentiment looks accurate," said Nigel Gault, U.S. economist at Global Insight in a note to clients.

Target cut its September same-store sales forecast to a growth range of 1.5% to 2.5%, down from its prior forecast of 4% to 6%, citing weaker than expected traffic and sales softness in the northeast and Florida. Lowe's shares fell more than 5% in morning action after the home-improvement retailer tempered its forecast for the year.

Consumers are starting to get worried about the conditions now, and they are starting to cut back on spending. The big question now is how much further will consumer confidence, and consumer spending, will drop?