Statistics depress hopes of US recovery

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The Independent Online
FEARS for the health of the US recovery were fuelled yesterday by a surprise fall in consumer confidence, a drop in the leading indicator of economic activity and the sharpest fall in single-family house sales for 13 years.

The figures depressed the dollar and gave the pound a fillip in late afternoon trading after a quiet start. Sterling closed 1.22 cents higher on the day at dollars 1.5057, its first close above dollars 1.50 for almost a fortnight.

The pound also rose against the beleaguered German mark during the afternoon, closing more than half a pfennig up on the day at a nine- month high of DM2.5461. The dollar closed almost a full pfennig lower at DM1.6910, also depressed in part by rumours that the Bundesbank had been selling dollars for marks.

The US consumer confidence index fell to 58.9 per cent in June from a revised 61.9 per cent the previous month. Wall Street economists had expected a rise of almost 63 per cent.

'The continued low level of consumer confidence suggests that the economy remains weak', said Fabian Linden, of the US Conference Board. Manufacturing employment and durable goods orders remained weak.

The 21 per cent fall in the annual rate of single-family new house sales in May was much larger than Wall Street had expected and the biggest drop since April 1980. But analysts warned that the fall followed an unusually strong figure in April.

President Bill Clinton said the fall in house sales illustrated the economy's short-term problems, adding: 'The economy will have great difficulty in totally recovering in any short period of time from the traumas of the last 10, 12 or 15 years'.

Further evidence that the US recovery may be slowing came with a 0.3 point drop in the leading indicator of economic activity, in line with Wall Street forecasts. However, dealers remained cautious ahead of the crucial non-farm employment figures on Friday and tomorrow's meeting of the Bundesbank council.