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Governor of the Bank of England, Sir Edward George
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Thursday, 28 December, 2000, 16:26 GMT
US confidence at year low
us shopping mall
US consumers are staying away from shopping malls
Consumer confidence in the States tumbled in December to its lowest level in more than a year.

If expectations continue on this downward trend, a more severe economic slowdown may be on the horizon

Lynn Franco
chief economist
Conference Board
The closely watched Conference Board consumer confidence index, which measures the public's optimism about the economy, fell for the third month in a row to 128.3 in December.

This compares to 132.6 in November and is a much bigger decline than analysts had predicted.

"This latest decline in consumer confidence suggests that consumer spending will cool further as we enter 2001," said the Conference Board's chief economist Lynn Franco.

"If expectations continue on this downward trend, a more severe economic slowdown may be on the horizon," she added.

More people work

Meanwhile, the US Labor Department reported that new claims for unemployment benefits fell sharply last week.

They declined by 23,000 to a seasonally adjusted 333,000, though analysts said the figure should be treated with caution because, during the Christmas break, many states provided estimates for claims rather than actual numbers of real claims.

The more stable four-week average of jobless claims declined to 340,750, the lowest point since mid November.

A slowing economy

The drop in consumer confidence indicates that the slowdown in the US economy is set to continue.

Consumer spending makes up two-thirds of economic output.

Both components of the index were lower.

One survey looks at how people view the state of the overall economy, the so-called present situation index.

It fell to 177 from 179.7 in November.

The other poll looked at people's estimates of their own short-term economic position.

Here consumer confidence was down to 95.8 from 101.2.

Interest rate cut expected

The US has seen ten years of unparalleled economic growth, but recently there have been signs of a slowdown.

Latest figures show growth is at its slowest rate in four years.

The Commerce Department has revised its estimate of growth of gross domestic product (GDP) in the third quarter to 2.2%, compared with a growth rate of 5.6% in the spring.

Last week, the US central bank, the Federal Reserve, held its nerve and voted not to cut interest rates - just yet.

But the pressure is on for the Fed to cut interest rates when it next meets on 31 January.

Some market officials even expect a reduction to come ahead of the monetary policy meeting.

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See also:

22 Dec 00 | Business
Stock markets halt slide
19 Dec 00 | Business
No cut in US interest rates
21 Dec 00 | Business
US economy slows sharply
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