US consumer confidence plunges

Downbeat consumers knocked Wall Street

US shoppers remained more cautious than analysts' expected in July as concerns over job losses overshadowed hopes of an economic recovery.

Consumer confidence figures showed an expected slump for July, knocking Wall Street shares in early trading.

US Treasury Secretary John Snow insisted the economy was "spring loaded" for a much faster recovery.

But economists and investors remained subdued.

"The rising level of unemployment and sentiment that a turnaround in labour market conditions is not around the corner have contributed to deflating consumers' spirits this month," said Lynn Franco, head of the board's consumer research centre.

"Expectations are likely to remain weak until the job market becomes more favourable," she added.

Employment fears

The Conference Board's monthly consumer confidence index slipped to 76.6 for July, down from 83.5 in June.

Analysts had been expecting a lift in confidence levels to around 85.0

"That's a big shift and doesn't sit well with expectations of a strong second half recovery," said John Caldwell, chief investment strategist at McDonald Financial Group.

It seems that what consumers are saying is, the worst is over, but they don't see a recovery yet Mark Vitner, Wachovia Securities

Analysts said consumers' biggest concern remained America's weak job market.

"It looks like a reaction to the headlines on unemployment," added Mr Caldwell.

The number of people out of work in the US hit a 20-year high in July, sparking concern among economists and investors.

Federal Reserve chairman Alan Greenspan dampened optimists' enthusiasm further when he warned the US economy was taking longer to pick up than anticipated.

In Mr Greenspan's half-yearly address to Congress in July, he said the central bank was cutting its growth expectations for 2003 and said businesses remained cautious about taking on new staff.

Wall Street hit

"It seems that what consumers are saying is, the worst is over, but they don't see a recovery yet.

"Until we get that pick up in hiring, I think consumer confidence is going to remain at these relatively low levels," said Mark Vitner, a senior economist at Wachovia Securities.

The weak figures also knocked investor confidence.

The Dow Jones index of leading shares closed the day down 62 points at 9, 204.

"There's a tug of war between the equities market and the labour market," said David Watt, a financial economist at BMO Nesbitt Burns.

"For now, the jobs situation is weighing on people's confidence a bit."