Surprise slide in US consumer confidence

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The Independent Online

An unexpected slump in US consumer confidence stirred fears yesterday that the post-war euphoria had already run out of steam. It also boosted expectations of a cut in interest rates later this month.

The University of Michigan's closely-watched gauge of household optimism slipped to 87.2 in June from May's 92.1. Analysts had expected a small rise. The downbeat tone surprised experts on Wall Street, where the Dow Jones fell as much as 122 points after being 26 points ahead before the survey was released.

The dollar also fell, but bond prices rose. Negative sentiment was fuelled by separate figures showing that prices charged by US factories fell in May.

James Knightley, an economist at ING Barings, said: "This report will increase talk of deflation and keep pressure on the Fed to cut rates later this month."

If consumer sentiment fell further and if Americans cut their shopping, that would tend to add to weakness in prices.

Paul Ashworth, an international economist at Capital Economics in London, said a half-point cut to 0.75 per cent was the most likely outcome of the US Federal Reserve meeting on 25 June.

Meanwhile, the US trade gap with the rest of world eased to $42.03bn in April from a revised $42.87bn in March.