Page last updated at 16:05 GMT, Tuesday, 28 October 2008

US consumer confidence nosedives

Shoppers in Arkansas
Consumer spending makes up the majority of the US economy

US consumer confidence has fallen to a record low in October, as global stock markets fall, homes are repossessed and firms lay off workers.

The Conference Board said the monthly consumer confidence index fell to 38, down from a revised 61.4 in September and below analysts' expectations of 52.

It is the lowest since the board began tracking consumer sentiment in 1967.

The survey of 5,000 US households is a gauge of consumer spending - which makes up two-thirds of the US economy.

It comes as the US government starts its cash-for-equity scheme to provide liquidity to financial institutions as part of a $700bn bank bailout

"Consumers are extremely pessimistic," said Lynn Franco, director of the Conference Board's research centre.

"This news does not bode well for retailers who are already bracing for what is shaping up to be a very challenging holiday season."

The fall in consumer confidence followed three consecutive months of modest gains.

But Ms Franco said: "In assessing current conditions, consumers rated the labour market and business conditions much less favourably, suggesting that the fourth quarter is off to a weaker start than the third quarter.

"Looking ahead, consumers are extremely pessimistic and a significantly larger proportion than last month foresees business and labour market conditions worsening."

Her warning came as household appliance maker Whirlpool said it would cut 5,000 jobs by the end of 2009, due in part to the downturn in US home sales.

Jeff Fettig, chairman adn CEO of the Benton Harbor, Michigan - based firm, said: "The global credit crisis has had a profound negative impact on what was already a weakening and very fragile global economy."

The September unemployment rate was at a five-year high of 6.1%.

The consumer confidence report comes as the Federal Reserve begins a two-day policy meeting on interest rates. Many analysts expect a cut in the key federal funds rate.

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