US consumer confidence tumbled for the fifth consecutive month in February to its lowest level since June 1996, according to a survey released today by a prominent business research group.
The Conference Board said its Consumer Confidence Index fell nearly nine points to 106.8 from a revised 115.7 in January, reflecting growing pessimism over the outlook for the next six months.
But the organization said that despite the gloom, the index does not signal the US economy is entering a recession.
"The erosion in consumer confidence continues to be fueled by weakening expectations regarding business and employment conditions," said Lynn Franco, director of the board's consumer research center.
"While the short-term outlook continues to signal a severe economic downturn, consumers appraisal of current economic conditions suggests we are still undergoing moderate growth and not a recession."
Analysts say the consumer confidence figure is closely watched by the Federal Reserve as an indicator of economic momentum, and that the slide in confidence could trigger a further cut in short-term interest rates.
Some economists have said that a weak consumer confidence report might prompt a cut in rates as early as this week.
The Fed Open Market Committee is not due to meet until March 20, but could act between meetings to cut rates.
On January 3, it stunned financial circles with a half-point inter-meeting reduction in its benchmark federal funds rate to six percent. Then, at its regularly scheduled session January 31 it lowered the rate -- a target used by banks making overnight loans among themselves -- another half a point to 5.5 percent.
Fed Chairman Alan Greenspan earlier this year said that while US economic momentum had slowed to near zero, the country would be able to avoid a recession as long as consumer confidence held reasonably firm. Consumer spending accounts for two-thirds of US gross domestic product.
The Conference Board said meanwhile that two separate indexes from its survey also showed declines.
The Expectations Index fell to 68.7 in February from 79.3 a month earlier and its Present Situation Index declined to 164.1 from 170.4
AFP