Hopes of a US economic revival have been dealt a blow by figures showing one measure of consumer confidence at a nine-year low and business investment suffering its biggest fall in nearly five years.
US investors have been betting on revival but the figures suggest businesses remain reluctant to expand operations, with executives apprehensive about the economy's direction and risks posed by developments abroad.
Along with reports this month of continued declines in retail sales and industrial output, the latest figures suggest the US economy, outside the housing market, stalled last month and may even have begun moving into reverse.
But equity market indices rose in early trading yesterday as investors remained focused on upbeat, forward-looking profit statements and hopes for a stronger economic rebound.
Speculation in futures markets about potential interest rate cuts by the US Federal Reserve intensified, but not substantially.
The Commerce Department said new orders for non-military capital goods, or business equipment, fell 12.6 per cent last month, the biggest decline since December 1997. Shipments of such goods were down for the second consecutive month.
The figures, closely watched by Mr Alan Greenspan, the Fed chairman, are considered an early barometer of business investment. They are contained in the department's monthly durable goods report, which showed new orders for goods such as cars and TV sets fell last month at the fastest pace in nearly a year. The 5.9 per cent decline to $167 billion (€171 billion) was the sharpest fall since last November and followed a 0.6 per cent drop in August.
Separately, the University of Michigan said its index of consumer sentiment fell to a nine-year low of 80.6 in October from 86.1 in September. It added to concerns of consumer spending weakening under the weight of a bad job market, rising debt loads and fears of war and terrorism.
- (Financial Times Service)
