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Friday, 26 October, 2001, 20:16 GMT 21:16 UK
US consumers remain wary
Graph showing home ownership rates in US regions
US consumers remain wary following the terror attacks on New York and Washington, fresh data has revealed.

A key measure of Americans' confidence in the US economy, the University of Michigan consumer sentiment survey, was said to have been revised downward for October to a reading of 82.7 from the previous estimate of 83.4.

Toll Brothers model home near Hartford, Connecticut
Demand for new homes remains strong
The report is available only to subscribers.

Still, the latest, final figure represents a rebound from September's reading of 81.8, indicating the psychological effects of the 11 September attacks may be waning, albeit slowly.

Faith in the US economy is seen as key to the future health of the economy, as economists rely on free-spending Americans to lift the nation out of its economic muddle.

Home sales slip

On Thursday, the National Association of Realtors reported sales of existing homes plunged 11.7% in September, the largest drop since April 1995.

On Friday, however, the government reported sales of new homes in the US fell during the month of September, but not nearly to the level many economists thought, indicating continued robustness among many consumers for homes.

Americans bought newly constructed homes at a rate of 864,000 units a year, besting analyst estimates of 852,000 homes, according to data released by the US Commerce Department.

Even in beating Wall Street's expectations, however, September new homes sales fell 1.4% from August, in which 876,000 new homes were sold, on a seasonally adjusted basis.

September's figure was also well below the pace of September 2000 when 902,000 homes sold.

Still, for the year, 2001 is shaping up to a better year overall than 2000, with an average 714,000 homes sold through September this year, compared with 679,000 homes sold during the first nine months of 2000 - an increase of 5%.

Hint of slowing

While many economists and businesses are keen on blaming the terror attacks, which left as many as 4,800 people dead, the data revealed that the previously bullish housing market showed signs of slowing well before 11 September.

That could pose problems for the US central bank, the Federal Reserve, which has cut a key interest nine times this year - twice since the attacks - in the hopes of staving off a recession.

Until recent months, Americans have continued to spend despite the slowing economy, and the Fed believed a cut in interest rates would keep consumers spending.

Interest rates on fixed-rate 30-year mortgages, the most popular type in the US, are as low as they have been in some time, recently standing at 6.64%, well below last year's 7.68% rate in September 2000, according to mortgage firm Freddie Mac.

'Solid' foundations

Speaking on Friday the US Treasury Secretary Paul O'Neill said he thought the US economy was now back where it was before last month's terrorist attacks.

"On balance, I think we've just about recovered the pace of where we were on Sept. 10," he said, adding that the economy's foundations were "very deep and very solid."

Mr O'Neill said that with the stimulus of extra spending and tax cuts on the way, he was confident the "economy will see a rebound into reasonable rates of growth as we move into the next year."


Terror's impact

Signs of a slowdown

Rate cuts

Analysis

Key players

FULL SPECIAL REPORT
See also:

17 Aug 01 | Business
White House foresees US growth spurt
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