The U.S. Conference Board Consumer Confidence Index shows that consumers are still suffering in the aftermath of September 11.

Consumer confidence for October fell to 85.5 today, much worse than economists had expected. This is the index’s lowest level since 1994, and the largest two-month drop since 1980. Future expectations and the assessment of the current situation both dropped dramatically.

“Recent events have taken a severe toll on U.S. consumer confidence,” says TD Bank, “signaling weaker spending and a recession bound economy. In the wake of the terrorist attacks in September, anthrax letter scares and deteriorating economic conditions, U.S. consumer confidence plunged in October to its lowest level in more than seven and a half years.”

BMO Nesbitt Burns says that, “The job market deteriorated further with jobs reported to be less plentiful and harder to get. Consumers also plan to rein in spending plans on big-ticket items, but notably, not for autos. Zero-interest rate incentive programs have attracted consumers to showrooms, although this activity is likely to wane when those programs end.”

TD forecasts that the report signals that personal spending and housing activity will be scaled back in the coming months, which bodes badly for the economy. “With consumers shaken by recent events and grappling with a high degree of uncertainty about the economic outlook, there is little doubt that purse strings are being tightened. The fallout from this consumer retrenchment virtually guarantees that the U.S. economy fell into recession in the final months of 2001.”

TD says the numbers indicate that the U.S. Federal Reserve Board’s work is not done. “Although markets had already priced in a 50 basis point rate cut in November, the bleak data increased speculation of a greater easing at next month’s policy meeting or further action in December.”

BMO says, “By itself, this report increases the likelihood of a 50 basis point cut by the Federal Reserve next Tuesday. However, the upcoming data will decide the issue.”