fundamental alert

US Consumer Confidence Plunges, But Still Above June's Lows

Friday, 17 October 2008 14:00:21 GMT  |  John Kicklighter, Currency Strategist

Whether the US economy is heading into a mild contraction or a harsh recession will likely be decided by cosnumer spending. With a drop in sentiment like the one reported from the University of Michigan's monthly report, the forecast looks as if it will fall into the latter category. The gauge reported its biggest month-over-month point drop in years with a far greater than expected contraction in confidence that pulled the indicator down to 57.5. Technically, sentiment - as measured by this gauge - isn't as bad as it was back in June (which reported a 28-year low). However, the components of this month's reading suggest things may actually be worse now, and that conditions are set to deteriorate further from here. Looking at the breakdown of the report, the current conditions gauge hit a new record low since data began in 1978. The outlook gauge on the other hand dropped but wouldn't rival June's low. With the economy almost certainly looking to a recession and difficult recovery for the financial markets, this component will likely 'catch up' in a month or two.

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