Page last updated at 15:05 GMT, Tuesday, 27 October 2009

US consumer confidence takes hit

Shoppers in Manhattan
US consumers are worried about job prospects

US consumer confidence fell sharply and unexpectedly in October as fears about future job prospects increasingly preyed upon Americans.

The closely-watched Consumer Confidence Index from the Conference Board business organisation slipped to 47.7 from a revised 53.4 in September.

Analysts were expecting the index to be unchanged or even to rise slightly.

Separately, a leading US index has found that house prices rose by more than expected in August.

Spending fears

The disappointing consumer confidence figures hit US shares, with the Dow Jones index down by 24 points, or 0.2%, at 9843.93 soon after the figures were released.

Rising unemployment played a "major role" in knocking confidence, the Conference Board said.

Figures released earlier this month showed that the US jobless rate rose to a fresh 26-year high in September of 9.8%

The figures also cast doubt on how strong Christmas holiday spending will be this year.

"Consumers remain quite pessimistic about their future earnings, a sentiment that will likely constrain spending during the holidays," said Lynn Franco, research director at the Conference Board.

Consumer spending accounts for about 70% of overall economic activity in the US, so weak spending in the run up to Christmas could have serious implications for the US economy.

An index reading of 90 in the Confidence Index is the minimum to indicate a healthy economy.

Tax credits

However, there was better news from the US property market.

The Standard & Poor's/Case Shiller Home Price index rose by 1.2% in August compared with July, although prices remained 11.4% lower than in August 2008.

But analysts were not getting carried away by the figures, suggesting that some of the recent rises in house prices could be down to temporary tax credits.

"The picture so far is that prices have bottomed and are beginning to revive on a broad basis," said Pierre Ellis at Decision Economics.

"The question is whether it will be sustainable with a lack of employment growth and the potential expiration of the first-time home buyer credit."



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