US Consumer Confidence at Year’s Lowest Level

02 January 2001

The planet is watching the US economy with more than a tad of anxiety, conscious of the adage that ‘when America sneezes, the world catches a cold’.

There is little comfort, therefore, in the Conference Board's latest index of US consumer confidence, which fell for the third month running, from 132.6 in November to 128.3 in December - its lowest level in more than a year. Consumer spending accounts for two-thirds of economic output.

Says CB chief economist Lynn Franco: “This latest decline in consumer confidence suggests that consumer spending will cool further as we enter 2001. If expectations continue on this downward trend, a more severe economic slowdown may be on the horizon," she warned.

The trend was, however, bucked by figures from the US Labor Department which showed new claims for unemployment benefits falling sharply last week.

These declined by 23,000 to a seasonally adjusted 333,000, although analysts cautioned against undue optimism as many states provided estimates rather than figures for real claims during the Christmas break However, the more stable four-week average of jobless claims declined to 340,750, its lowest point since mid November.

Pressure is now growing for US central bank, the Federal Reserve, to cut interest rates at its next monetary policy meeting on January 31. Some analysts predict that a reduction may even be announced in advance of the meeting.

News source: BBC Online Business News (UK) [28/12/00]