Economy Hit As Consumers Tighten Belts; Firms Signal Concern Over Late Payments; 'The Teeth of the Storm'
The consumer leg of the economy, which has been remarkably stable throughout the housing downturn, may now be tottering.</br></br>The Dow Jones Industrial Average tumbled 246.79 points, or 1.9% to 12606.30 yesterday on the back of fresh signs that consumer spending is slowing. In an indication that even well-heeled shoppers may be cutting back, luxury jeweler Tiffany & Co. said that its U.S. sales slumped during the holiday period. American Express Co. warned late Thursday of rising delinquencies and slowing spending among its cardholders.</br></br>They joined a host of companies with close ties to consumers sounding alarm bells. A number of retailers, including Kohl's Corp., cut earnings projections after reporting weaker-than expected sales Thursday. Credit-card company Capital One Financial Corp. said its 2007 earnings would fall short of its earlier forecast. And AT&T Inc. said it has been cutting off more landline and high-speed Internet customers for non-payment.</br></br>December auto sales also slumped broadly, with a 3% drop in sales compared to a year ago, according to industry tracker Autodata Corp.</br></br>"All of these things that are taking place -- credit markets, energy prices, housing -- are hitting consumers right now," says J.P. Morgan chief economist Bruce Kasman. "We're in the teeth of the storm."