WASHINGTON -- Consumer confidence took its steepest fall in nearly three years in June, dropping to the lowest level since late last year, the Conference Board reported yesterday.
The surprisingly big decline reported by the New York-based business research group was taken as a sign that consumers, their incomes growing slowly and saddled with high debt, will continue to spend cautiously in coming months.
Still, analysts tended to play down the effect of this latest economic reading on the Federal Reserve, which many believe is likely to reduce short-term interest rates at a meeting next week.
They said that in recent years confidence had been more a mirror of current conditions than a predicting, or leading, indicator. "Confidence is sort of coming into line" with flat sales early this year, said Bruce Steinberg, a senior economist at Merrill Lynch. He added that consumer spending, which accounts for about two-thirds of economic activity, "is not going to come roaring back."
The Conference Board said that its overall index skidded to 92.8, in June from 102 in May. This was the lowest since October, when the index, based on a survey of 5,000 households, stood at 89.1.
Eight of nine geographic regions -- the only exception being the eastern south-central states -- showed declines. As in May, the lowest confidence was in the mid-Atlantic region, followed by New England.
The expectations component, which seeks to gauge activity over the next six months, was especially weak, plunging to 81.3 from 93.1, on a small decline in the number of consumers who 'D expected business to improve and a moderate increase among those who feared it would worsen. Expectations are now the lowest since November 1993.
"Despite the relatively large decline in confidence in June and other signs of a slowing in the pace of the nation's economic growth, the current confidence level has been historically associated with a reasonably strong economy," said Fabian Linden, executive director of the board's Consumer Research Center. "Still, the magnitude of the decline is somewhat disconcerting."
As for current business conditions, the Conference Board found people moderately less positive than in May.
The June reading was 110.1, down from 115.4 last month and from the peak recent reading, in April, of 116.2.
Bond prices, which tend to rise on weak economic data, rallied after the Conference Board report was released.
But they retreated later in the day, weighed down by a lackluster auction of Treasury notes and a strong weekly retail sales report from Johnson Redbook.
The drop in overall confidence was the largest since July 1992, when the economy was clawing its way out of recession.
Geographically, the highest confidence by far, at a reading of 126.3, was recorded in the Mountain states.
In second place, at 112.4, were the states of the eastern north-central region.