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Tuesday, 31 July, 2001, 15:07 GMT 16:07 UK
US consumers spend on - for now
US consumers
Still spending freely - but for how much longer?
US consumer spending rose 0.4% in June over the previous month, according to new figures from the US commerce department.


The moderate decline in confidence signals slow economic growth ahead

Lynn Franco, US Conference Board
Meanwhile, personal incomes went up by a modest 0.3%, the department said.

But other figures released on Tuesday showed consumer confidence, which had edged up in June, slipped in July, following a stream of corporate lay-offs.

Consumer spending had been one of the key factors which has kept the US economy from slipping into recession.

But falling consumer confidence suggests spending and growth might slow in the coming months, as job losses take their toll.

Unemployment rise

The country's unemployment rate rose to 4.5% in June and businesses cut 114,000 jobs.

Many economists are predicting the July jobless rate will climb to 4.7% and that another 38,000 jobs will be cut.

The US government is due to release its monthly employment report on Friday.

Last week, the government began mailing about $38bn of tax rebate cheques to individuals and families, which some analysts believe will boost consumer spending and help the country avoid a recession.

But the consumer confidence figures are likely to increase expectations for a further cut in interest rates when the US central bank, The Federal Reserve, meets on 21 August.

The Fed has already cut short-term rates six times this year in an effort to head off a recession.

Confidence falls

The consumer confidence survey, produced by business research group The Conference Board, fell to 116.5 on July from 118.9 in June.

Despite that fall it remains well above its recent low of 109.2 in February of this year.

The Present Situation Index, which measures consumers' feelings about the state of the the economy right now, fell to 152 from 156.8 in June.

While the Expectations Index, which gauges the outlook for the next six months, dipped to 92.9 from 93.5.

Lynn Franco, director of the Conference Board's consumer research centre, said: "The moderate decline in confidence signals slow economic growth ahead."

 WATCH/LISTEN
 ON THIS STORY
The BBC's Stephen Evans reports
"It increasingly looks as though this will be seen as a recession"
See also:

29 Jul 01 | Business
Brown voices slowdown fears
13 Jul 01 | Business
US economy slowing but not slumping
09 Jul 01 | Business
US weakness 'to continue'
02 Jul 01 | Business
American consumers spend on
12 Jun 01 | Business
Worrying times for US homeowners
08 Jun 01 | Americas
Bush tax cuts become law
01 Jun 01 | Business
Mixed picture of US economy
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