Consumer confidence plunges
Posted by ecoshift on October 17, 2008
Confidence plunges among US consumers FT.com / World / US & Canada
By Krishna Guha in Washington and Anuj Gangahar, Saskia Scholtes, Jonathan Birchall and Daniel Pimlott in New York
Published: October 17 2008 19:57 | Last updated: October 17 2008 21:35
US consumer confidence has fallen more sharply this month than in any month since records began in 1978, a widely followed survey showed on Friday, raising fresh fears about consumer spending.
The University of Michigan consumer sentiment index fell from 70.3 in September to 57.5 in October, well below economists’ expectations.
The sharp deterioration raises the danger that US households, scared by the extraordinary events of recent weeks and weighed down by the fall in stock and house prices, will retrench, sending the economy into what could be a deep recesssion.
“People are really terrified and this has the potential to have a big impact on spending,” Frederic Mishkin, a professor at Columbia University and former governor of the Federal Reserve, told the Financial Times prior to the release of the Michigan figures.
The poor sentiment comes as banks and finance companies cut back on consumer credit – in particular car loans – amid growing evidence that people are struggling to meet their payments.
Underlining the grim mood, Linens N Things, once the second largest US home furnishings chain, launched liquidation sales at its 371 remaining stores on Friday. VF Corporation, owner of clothing brands including Wrangler and The North Face, also slashed fourth-quarter revenue forecasts, saying the financial crisis and economy had taken “a heavy toll on consumer confidence and spending in many markets around the world”.
The company, which supplies retailers such as Wal-Mart and Nordstrom, said the second half of September had been a “turning point” for sentiment.
Separate data showed that US housing starts fell again in September to their lowest level in nearly half a century, indicating that the housing sector is still far from bottoming out.