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Consumer Outlook Declines Sharply

<i> From Associated Press</i>

In its biggest monthly drop since January, consumer confidence fell for a third straight month in September amid Americans’ rising fears that global economic and political turmoil will slow the U.S. economy in coming months.

The Conference Board said Tuesday that its index of consumer confidence fell 7.1 points to 126 in September from a revised 133.1 in August. The index is down 12.2 points from its 29-year high in June.

September’s decline, which was larger than Wall Street analysts had expected, brings the index to its lowest level since October 1997.

“Tumultuous financial markets here and abroad and unsettling political developments in the U.S. have been major factors in curbing consumer confidence,” said Lynn Franco, associate director at the Conference Board, a New York-based private research group.

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Consumer sentiment is important because consumer spending accounts for two-thirds of the nation’s overall economic activity.

The report comes amid increasing signs that the U.S. economy is slowing as a result of the economic crises in Asia and Russia that now are threatening to spread to Latin America.

In the Conference Board report, consumers said they were most concerned about what’s yet to come, sending the index that measures expectations for the next six months down 10.9 points to 95.9. Fewer Americans said they would buy a car or a major appliance.

Among Americans’ greatest concerns is the volatility in global stock markets. Also troubling to consumers is the uncertainty about President Clinton’s future and whether he will be impeached.

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Only one of the nation’s nine geographic regions--the northern Midwest--saw a rise in consumer confidence in September.

Although consumers are worried about future economic conditions, they remain somewhat confident about their current economic situation. The index that measures feelings about present conditions dropped only 1.4 points to 171.2 in September.

“Consumers are thinking, ‘How are we doing and how are we going to do?’ ” said Dan Seto, an economist at Nikko Securities International Co. “While the current conditions are still quite strong, the expectations element has shown some pullback.”

The consumer confidence index, started in 1967, is compiled from responses to questions sent to 5,000 households nationwide. The survey polls consumers on matters ranging from job prospects to buying plans. The index compares results with its base year, 1985, when it stood at 100.

* RATE CUT: The Fed cut interest rates by a quarter of a point. A1

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Consumer Confidence

From a monthly survey of 5,000 U.S. households.

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Index: 1985--100

September: 126.0

Source: Conference Board


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