BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific
BBCi NEWS   SPORT   WEATHER   WORLD SERVICE   A-Z INDEX     

BBC News World Edition
 You are in: Business  
News Front Page
Africa
Americas
Asia-Pacific
Europe
Middle East
South Asia
UK
Business
E-Commerce
Economy
Market Data
Entertainment
Science/Nature
Technology
Health
-------------
Talking Point
-------------
Country Profiles
In Depth
-------------
Programmes
-------------
BBC Sport
BBC Weather
SERVICES
-------------
EDITIONS
Tuesday, 30 July, 2002, 21:32 GMT 22:32 UK
Falling consumer confidence drives gloom
Conference Board graph
Consumers faith in the US economy continues to wane

The White House has said it sees "worrisome" signs in the US economy even as it says the foundations for recovery are at hand.


Usually you have the consumer tanking, but the consumer never tanked

Delos Smith
One of the troublesome indicators was a report released on Tuesday which showed consumers' faith in the strength of economy fell to a five-month low in July.

"There are plenty of signs to look to in the economy to see the strength that the president sees," White House spokesman Ari Fleischer said.

"But there is now question that there are some worrisome signs like consumer confidence."

The Conference Board reported its index of consumer faith in the economy fell to 97 in July from 106 in the previous month.

Cheerleaders for the economy say that given what the US has been through in recent months, Tuesday's number showed consumers remain enthusiastic about prospects for growth.

Searching for growth

Despite the nine-point drop, experts say the resilience shown by Americans in recent months likely will continue to drive economic growth.

Conference Board senior business analyst Delos Smith
Mr Smith expects August's consumer number to rise
US consumers over the last year have continued to buy homes, cars and other retail goods, despite last September's terrorist attacks, a recession and the ongoing spate of accounting scandals.

"Usually you have the consumer tanking, but the consumer never tanked," said Delos Smith, senior business analyst at the Conference Board, a non-profit research firm that compiles data for the consumer confidence report.

Analysts will be looking for further evidence of American stalwartness on Wednesday when the government releases its initial report on economic growth for the three month period ending 30 June.

Predictions call for Growth Domestic Product (GDP) to fall to about 2.3% in the second quarter, much lower than the 6% pace seen during the first three months of 2002.

Mr Smith told BBC News Online he expects recent efforts by the government to restore investor confidence to assuage consumers as well.

"This is a turnaround," he said, adding that he expects a nine- or 10-point rise in August's number.

'Hard time'

The gain will be driven by investors belief Washington has levelled the playing field between the average American and powerful Wall Street investment banks.

Much has been done, Mr Smith said, including numerous Congressional hearings on the role brokerages and executives had in accounting scandals at WorldCom and Enron.

Also contributing were recent high-profile arrests of five former executives of Adelphia Communications, who stand accused of bilking investors out of billions of dollars.

Such efforts have helped lift investor and consumer confidence, further boosting spending and faith in the economy.

One result has been the recent run-up in blue-chip stocks. In the last week, the Dow Jones industrial average has risen 1,000 points.

On Tuesday, US President George W Bush added more fuel to the fire by signing into law tough, new corporate-scandal legislation.

In making the bill law, Mr Bush promised "no more easy money for corporate criminals - just hard time" for white-collar crime.

"The speech he made today was a consumer confidence speech - that's all it was," the Conference Board's Smith said.


Economic indicators

Fears and hopes

US Fed decisons

IN DEPTH
See also:

30 Jul 02 | Business
30 Jul 02 | Business
12 Jul 02 | Business
Internet links:


The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.


E-mail this story to a friend

Links to more Business stories

© BBC ^^ Back to top

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East |
South Asia | UK | Business | Entertainment | Science/Nature |
Technology | Health | Talking Point | Country Profiles | In Depth |
Programmes