Consumer confidence at lowest since 2005

NEW YORK - Worries about jobs and the overall economy flared this month, driving a key barometer of consumer sentiment to its lowest level in nearly two years, a private research group said yesterday.

That report, plus another yesterday on the continued slump in housing sales, could be a bad sign for retailers if worried shoppers curtail spending during the holiday season.

But the stock market took some heart from the warning signs, hoping that they would goad the Federal Reserve to lower interest rates further.

The Conference Board, a New York business research group, said its Consumer Confidence Index fell to 99.8, an almost six-point drop from the revised 105.6 in August. The reading was well below the 104.5 analysts had expected.

It marked its lowest point since a 98.3 reading in November 2005, when gas and oil prices soared after hurricanes Katrina and Rita devastated the Gulf Coast.

"Weaker business conditions combined with a less-favorable job market continue to cast a cloud over consumers and heighten their sense of uncertainty and concern," Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement. "Looking ahead, little economic improvement is expected, and with the holiday season around the corner, this is not welcome news."

However, consumer confidence in the three Middle Atlantic states rebounded this month after a large drop last month. The index rose to 91.9 in September from 83.8 in August - though that remained below July's 99.1. The board defines the region as Pennsylvania, New Jersey and New York.

In the national report, the Present Situation Index, which measures how shoppers feel now about the economy, declined to 121.7 from 130.1 in August.

The Expectations Index, which measures shoppers' outlook over the next six months, declined to 85.2 from 89.2.

Economists closely monitor confidence since consumer spending accounts for two-thirds of U.S. economic activity.

Retailers have seen spending slow all year amid falling home prices and higher gas and food bills. The financial turmoil in August and escalating problems in the credit market have made economists and retailers more nervous about the prospects for a decent holiday period.

While the Federal Reserve's decision last week to cut its interest rate half a point was meant to soften the impact of the housing woes on the overall economy, economists say it won't do much to help spending this holiday.

A big issue is the job market, which saw its first drop in job creation in four years in August.