U.S. Consumer Confidence Up Slightly

U.S. consumer sentiment improved slightly in October as Americans shrugged off gloom from mounting job layoffs, but new-home sales last month fell to their most sluggish pace in a year, highlighting the fragility of the U.S. economy.

Though the two reports Friday added to evidence that the Sept. 11 terrorist attacks knocked some steam out of an already weakened economy, some analysts said conditions had not deteriorated as much as feared.

“The data we saw this week suggest that the consumer is holding in better than businesses,” said Astrid Adolfson, economist at MCM Moneywatch in New York. “That supports the economy, and suggests a recession could be shallower than many people fear.”

The University of Michigan’s closely watched sentiment barometer rose to 82.7 in October from 81.8 last month, matching analysts’ forecasts.

But economists warned that although the index appeared to have stabilized, sentiment hovered only slightly above its lowest level in nearly eight years reached in September after the attacks on the World Trade Center and the Pentagon.

The university’s consumer sentiment index deteriorated in the last two weeks from the mid-month reading of 83.4, in line with weekly surveys, showing that there was a risk that optimism by consumers could once again erode if fears of bioterrorism spread, economists said.

“Household assessments of economic conditions remain fragile,” said Steven Wood, economist at FinancialOxygen Inc., adding that confidence levels remained “sharply below where they were just a year ago.”

The Commerce Department reported that sales of new homes dropped 1.4% in September to a seasonally adjusted annual rate of 864,000 from a downwardly revised 876,000 in August, beating expectations for a pace of 856,000. But sales slowed 4.2% from year-ago levels.