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US Consumer Confidence Dips - 2001-07-31


Consumer confidence in the United States dipped slightly in July. But a survey released Tuesday by a private business research group, the Conference Board, also indicates that consumer spending plans are still on track. Consumer confidence slipped a little more than two points in July, from 118.9 in June to 116.5. The expectations index, a measure of how consumers feel looking ahead about six months, fell to just under 93, a drop of less than a point.

Most economists consider the expectations component more critical. The more confident consumers are about the future, the more confident analysts feel about the consumer's willingness to spend. Consumer spending accounts for two-thirds of the U.S. economy.

Delos Smith is an economist with the Conference Board. "The key is, is it over 90? It came in at 93, down from 93.5. I mean that's too tiny. It's above 90 that really is the key," he says. "Buying plans look very good. They rebounded from June. That consumer is still staying with us."

The expectations index just this past February was down as far as 70. Analysts say people then were a lot more pessimistic about the U.S. economy. Corporate profits were plunging, businesses were laying off employees, and people were losing money in the stock market.

Since then, the U.S. central bank reduced interest rates a few more times, six rate cuts so far this year. And, while corporate earnings are not improving, many companies are projecting the start of a recovery in the fourth quarter, or early next year.

Throughout, however, consumer confidence seemed to hold up well. Spending was less enthusiastic perhaps. But it never dried up. The latest government figures show consumer spending continued to post gains in June at a faster pace than many expected.

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