US consumer confidence takes hit

US consumer confidence fell sharply and unexpectedly in October as
fears about future job prospects increasingly preyed upon Americans.
The closely-watched Consumer Confidence Index from the Conference
Board business organisation slipped to 47.7 from a revised 53.4 in
September. Analysts were expecting the index to be unchanged or even
to rise slightly. Separately, a leading US index has found that house
prices rose by more than expected in August. Spending fears The
disappointing consumer confidence figures hit US shares, with the Dow
Jones index down by 24 points, or 0.2 %, at 9843.93 soon after the
figures were released. Rising unemployment played a "major role" in
knocking confidence, the Conference Board said. Figures released
earlier this month showed that the US jobless rate rose to a fresh
26- year high in September of 9.8 % The figures also cast doubt on
how strong Christmas holiday spending will be this year. "Consumers
remain quite pessimistic about their future earnings, a sentiment
that will likely constrain spending during the holidays," said Lynn
Franco, research director at the Conference Board. Consumer spending
accounts for about 70 % of overall economic activity in the US, so
weak spending in the run up to Christmas could have serious
implications for the US economy. An index reading of 90 in the
Confidence Index is the minimum to indicate a healthy economy. Tax
credits However, there was better news from the US property market.
The Standard & Poor's/Case Shiller Home Price index rose by 1.2 % in
August compared with July, although prices remained 11.4 % lower than
in August 2008. But analysts were not getting carried away by the
figures, suggesting that some of the recent rises in house prices
could be down to temporary tax credits. "The picture so far is that
prices have bottomed and are beginning to revive on a broad basis,"
said Pierre Ellis at Decision Economics. "The question is whether it
will be sustainable with a lack of employment growth and the
potential expiration of the first-time home buyer credit."