Job fears dent US consumer morale

27-07-2005

US consumer confidence fell unexpectedly in July as more Americans worried about their job prospects. The Conference Board said its gauge of consumer sentiment fell to 103.2 from a revised 106.2 in June. Analysts had forecast a reading of 106.

The board said morale slipped as consumers took a more mixed view of their job and wage prospects.

The percentage of people in the survey who believed jobs were hard to get rose to 23.8%, from 22.5% last month.

Economic barometer

However, the percentage of people who believed that jobs were plentiful remained at 22.5% for a second month in a row.

Retail spending makes up two-thirds of the US economy, so consumer confidence is an important barometer of economic growth prospects.

However, analysts say that in recent years the link between confidence and retail sales seems to be diverging, with consumers making big purchases - such as cars - despite telling surveys they believe times are getting harder.

Earlier this month, big US stores said a heatwave had generated better-than-expected sales in June - with retail giant Wal Mart reporting its biggest sales leap in 13 months.

Petrol jitters

Experts claimed surging oil prices may have prompted the dip in consumer morale - recent record crude prices have now fed through to the petrol pump resulting in record fuel prices.

Government figures earlier this month showed that petrol prices hit a new record of $2.33 a gallon - leaving prices up 41 cents compared to the same period last year.

Lynn Franco, the head of the board's Consumer Research Center, said July's dip in confidence - which ended a three month winning streak - was "no cause for concern".

"The overall state of the economy remains healthy and consumers' outlook suggests no storm clouds on the short-term horizon," she said.

BBC News

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