US consumer confidence, among the most closely watched of the economic indicators, plunged this month, jolting stock markets and further dimming the prospect of a vigorous economic recovery anytime soon.
Yesterday's gloomy news from the Conference Board research group was more than enough to cancel out the impact of a healthy rise in durable goods orders in July. These jumped 8.7 per cent to $179.7bn (£117bn), the biggest monthly rise since October, which initially sent the Dow surging. It ended down 95 points at 8,824.1.
After a four-point fall to 93.5 in August, the board's index is now at its lowest level since November 2001. The decline in confidence was driven by a board survey of consumers which rated current economic conditions as the worst in eight years.
"Consumer spending is not likely to gain momentum any time soon," Lynn Franco, a director of the board's consumer research centre, said. But she said the current level of expectations is consistent with "a continued, but slow, economic expansion".
A similar message came from Intel, the world's largest computer chip maker, whose shares fell 5 per cent to end at $17.18 yesterday after its chief executive refused to predict when the current slump in hi-tech spending by business would end.
Intel stock has dropped more than 50 per cent this year, as expectations of a rebound in computer spending have been repeatedly dashed. Craig Barrett, Intel's chief executive, said the chip business would grow modestly in the third quarter. But the corner had not been turned. "When it turns around will be when companies start reinvesting," he added. "I'm not forecasting when that will happen."
Everything indicates this summer's sharp tumble on Wall Street is now feeding through into the wider economy. Retail sales at leading chain stores have been flat in August, despite the bright durable goods report from the Commerce Department and the advent of the back-to-school shopping season.
Even Wal-Mart, the world's largest retailer, is feeling the pinch, reporting that sales at its established stores are running at the lower end of its 4 to 6 per cent growth forecast. Sears Roebuck and the third-largest US discount chain Target Stores have also said that business this month has been below expectations.
"This is the response that we would expect over a period of time to lower wealth and lower stock prices," Peter Kretzmer, a senior economist at Banc of America Securities, said. "Households are adjusting by saving a higher portion of their income."
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