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Friday, 19 January, 2001, 16:21 GMT
US consumer confidence plunges
Alan Greenspan and stock price graph
The Federal Reserve, chaired by Alan Greenspan, has "more work to do"
Fears of a US recession have been raised by figures showing that consumer confidence, which hit two-year lows last month, has fallen further.

The survey certainly underscores the notion that the economy has undergone an abrupt transition from rapid growth to something altogether different

David Resler, chief economist, Nomura Securities
Consumer sentiment, as measured in a benchmark University of Michigan rating, has fallen almost 5 points in a month to 93.6, reports on Friday said.

The decline in confidence over the two months was the third largest on record, said sources who have seen the data, which is available only to subscribers.

Similar two-month declines preceded the recessions in the early 1980s and 1990s, the survey's director is quoted as saying in Friday's report.

Interest rates

The data suggest that the US Federal Reserve will have to implement further interest rate cuts in order to boost the economy.

Dana Johnson, senior managing director at Banc One Capital Markets in Chicago, said:

"The continued deterioration in confidence here is certainly a warning sign that the Fed probably has more work to do to create a sense of calm about the economic prospects."

David Resler, chief economist at Nomura Securities International, said:

"The index has caught everybody's attention. The survey certainly underscores the notion that the economy has undergone an abrupt transition from rapid growth to something altogether different."

Slowing growth

Just six months ago the US economy was growing at a rate of 6% annually - but since then there has been growing evidence of a sharp slowdown which some fear may lead to a recession.

The latest quarter showed growth of only 2.2%, while business surveys also show declining confidence.

The latest numbers follow a decline in the trade gap, as a slowing economy imports fewer goods.

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See also:

17 Jan 01 | Business
US recession could be short-lived
04 Jan 01 | Business
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Stock prospects for 2001
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