American consumers, whose confidence in the nation's economic outlook already had been battered by soaring oil prices and widespread layoffs, turned gloomier still as the Jan. 15 deadline for Iraq's withdrawal from Kuwait neared, according to a survey released yesterday by a New York business research organization.
The data from the Conference Board indicated, however, that once the fighting actually began and initially seemed to go well, consumer sentiment shifted somewhat. While feelings about current conditions worsened, expectations about the economic situation six months from now rose modestly.
A separate Washington Post-ABC News poll conducted Jan. 27 showed that two-thirds of the respondents think the U.S. economy is getting worse, while only 6 percent believe it is getting better.
But both those readings are better than those in the last Post-ABC poll on Oct. 14. At that time 77 percent said the economy was worsening and 3 percent said it was improving.
Consumer confidence is often looked to as a barometer of future spending intentions. When confidence plummeted last fall, consumer purchases also fell, dragging down the entire economy in the fourth quarter.
Fabian Linden, director of the Conference Board's Consumer Research Center, attributed the drop in the center's consumer confidence index to 54 in January from 61.2 in December "almost entirely" to the Persian Gulf crisis. But he said the extremely low reading did not necessarily mean that worried consumers would reduce their spending as much as they would if economic conditions, rather than the gulf crisis, had caused confidence to plummet.
"A disenchantment caused by economic conditions would have more impact on consumer behavior than a disenchantment provoked by a political situation," Linden said. "You should not expect the sky to fall in."
L. Douglas Lee, chief economist at Washington Analysis Corp., an economic consulting firm here, agreed. "I would like to see those numbers higher than they are, but I am just not convinced that the outlook for consumption from this point is deteriorating," Lee said. "It's been poor but it's not deteriorating."
At 54, the Conference Board index has fallen by nearly half from the level of 101.7 in July, prior to the invasion of Kuwait. The January figure was the lowest for the index since the 1980 recession, which was marked by an exceptionally large decline in both confidence and consumer spending.
After dropping sharply from July to October, the confidence index declined only slightly in November and December. As the index appeared to stabilize, consumer spending perked up a bit, according to a Commerce Department report on personal expenditures released Monday.
That report said consumer spending rose half a percent last month, after adjustment for inflation. The December gain followed a large 0.9 percent drop in October and an 0.1 percent drop in November. Falling consumer spending was a major reason that the overall level of economic activity fell at a 2.1 percent annual rate in the fourth quarter, and any change in consumer attitudes that could affect future spending could be the key to how soon U.S. economic growth will resume.
"After military action began, consumer confidence picked up slightly, presumably because early indications suggested a short war," Linden said. "A reasonably quick victory might well provide the psychological thrust to invigorate the economy."
"This is a 10-year low, a dreary reading not justified by the ... economic conditions we are experiencing," he said. "So we have to conclude that the political situation accounts for the very low reading in the month of January... ."
The Washington Post-ABC News poll showed a more marked erosion in the first 10 months of last year than did the Conference Board's survey.
In the Post-ABC poll, the share of those surveyed who thought the economy was getting worse rose from 38 percent last January to 77 percent in October. Those who thought it was remaining the same fell from 51 percent to 19 percent, and those who believed it was getting better dropped from 11 percent to 3 percent.
The results of last Sunday's polling showed an improvement in all three categories.
While a substantial majority of those polled beginning last July said they thought the national economy was getting worse, a majority never said the economy of their own region was worsening. In the latest poll, 43 percent said their regional economy was getting worse, 47 percent said it was remaining the same and 8 percent said it was getting better.
In the Conference Board survey, which breaks the country into nine regions, the biggest declines in confidence this month came in the South, Southwest, mountain region and Pacific states.
In the region hardest hit by the economic slump, New England, confidence rose modestly for the third month in a row.
Senior polling analyst Sharon Warden contributed to this report.