Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : CNBC -- critique. -- Ignore unavailable to you. Want to Upgrade?

To: Yogizuna who wrote (7329)	2/27/2001 10:30:12 PM
From: sandintoes	Read Replies (1) \| Respond to of 17683

From the looks of things, he has no choice but to cut more, and the sooner the better! washingtonpost.com By John M. Berry Washington Post Staff Writer Tuesday, February 27, 2001; 2:42 PM Consumer confidence continued to decline this month as American households' expectations about their economic future plunged to a level usually seen only during recessions, according to a report out this morning. Two other reports on last month's new orders for durable goods and sales of new homes, both from the Commerce Department, showed some weakness but were not nearly as disturbing to analysts as what has been happening to consumer attitudes. Falling stock prices, worries about job prospects, high heating bills and a drumbeat of gloomy statements about the economy from Wall Street analysts, company executives and the White House have taken a big toll on consumers' expectations. If they were to pull back on their spending, which accounts for about two-thirds of the nation's economic output, it could turn what so far is only very slow economic growth into a serious slump. The Conference Board, a New York-based business research group, said its monthly consumer confidence index fell to a reading of 106.8, down by 25 percent from its level five months ago. But the overall index is a composite of two separate measures of how consumers regard their present economic situation and what they expect it to be like six months from now. The present situation index has declined by 10 percent since September, while the expectations reading has plunged by 40 percent. "The erosion in consumer confidence continues to be fueled by weakening expectations regarding business and employment conditions," said Lynn Franco, director of the board's Consumer Research Center. "While the short-term outlook continues to signal a severe economic downturn, consumers' appraisal of current economic conditions suggests we are still undergoing moderate economic growth and not a recession." In congressional testimony two weeks ago, Federal Reserve Chairman Alan Greenspan warned, "It is difficult for economic policy to deal with the abruptness of a break in confidence." However, he also added, "Although consumer confidence has fallen, at least for now it remains at a level that in the past was consistent with economic growth." Since then, the Conference Board measure, and a similar one from the University of Michigan that measures consumer sentiment, have both declined significantly. Tomorrow morning Greenspan will update that testimony when he appears before the House Financial Services Committee. Many analysts will be listening for clues as to whether the Fed might cut short-term interest rates again within a few days or whether officials will wait until a scheduled policymaking session March 20. Analysts generally expect another half-percentage point cut in the Fed's 5.5 percent target for overnight interest rates. The target was cut twice by that amount last month. Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, N.Y., said the sharp fall in expectations "implies that consumer spending will slow dramatically over the next few months. It may even fall. "The only way out of this mess is for the stock market to rebound substantially and rapidly – particularly the Nasdaq index – but we have few hopes this is a realistic proposition. It now seems appropriate to start thinking about a [Fed target for overnight rates] as low as 4 percent by the summer." Both of the other reports out today showed very large declines, but analysts said the numbers were distorted by unusual factors that affected the same statistics in December. New home sales fell 10.9 percent last month to an annual rate of 921,000 units. But the December numbers were revised upward sharply to an annual rate of 1,034,000, the highest level ever. Analysts said the January rate for purchases of new homes was still above the monthly rates for virtually all of last year except December, and therefore was not really evidence of new weakness in what has been the most consistently strong part of the economy. The report on durable goods orders was more problematic. Maury N. Harris, chief economist at UBS Warburg in New York, told his clients that orders "skidded 6 percent in January as aircraft orders dove 49 percent from a six-month high in December and orders for motor vehicles fell again. Excluding the volatile transportation sector, orders fell by 0.3 percent, the third drop in four months. "However, orders for nondefense capital goods excluding aircraft – the segment of orders that is most closely linked to [business] capital spending – leapt 6.5 percent, reversing a three-month slide," Harris said. That solid increase "suggests that weakness is not overwhelming." Jerry Jasinowski, president of the National Association of Manufacturers, said the durable goods figures indicate that "manufacturing is in the middle of a serious inventory correction that's likely to continue into the second quarter, which means we probably won't see a turnaround in new orders until the middle of the year."