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US Consumer Confidence Falls Again, But Optimism Rises for Future - 2001-08-28

Consumer confidence in the United States fell in August for the second straight month. But a survey released Tuesday by the Conference Board, a private business research group, indicates consumers are more optimistic about the economy six months from now.

Consumer confidence dipped two full points in August, down to 114.3. The Conference Board says people are worried about the job situation after the recent flood of corporate lay-off announcements.

However, Conference Board economist Delos Smith said the news is not that bad when you go beyond the headline number of lower confidence. The expectations index, which reflects how people view their prospects six months ahead, has actually gone up in August. "It's expectations that are key and for the third straight month we are at the 93 area," he said. "Anything above 90 is fine. Now remember in February we were at 70.7. So here we are at 93.3. That's a rise of 22 points. So the consumer has been feeling better. Now when the consumer starts to feel badly, that number really goes south."

But some experts are more concerned with how Americans view their present situation. They warn that worry over jobs could dampen consumer spending, which accounts for two-thirds of the U.S. economy.

Analyst Peter Henderson said consumer attitudes impact the stock market, and the latest confidence figures are not a good sign. "I was in Europe a number of weeks ago. And all they were talking about was consumer spending in the U.S.," he said. "And they were really petrified that if the consumer spending slows down, that the economy of the U.S. is going to slow down and it's going to affect them almost twice as drastically as it will affect us. So that number was very important this morning, and it is not good news for the near term in the market."

Some experts are starting to look at last Friday's big gains on Wall Street as a rally "without legs".