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.

Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: sea_biscuit who wrote (419878)	6/28/2003 10:24:39 AM
From: Kenneth E. Phillipps	Respond to of 769669

Reports suggest economy sluggish Consumer confidence slumps; spending ekes out modest rise By James Collins, Globe Correspondent, 6/28/2003 A report showing a modest rise in consumer spending was muted yesterday by a drop in consumer confidence, dampening analysts' recent optimism that the economy is headed for a turnaround. ''The economy has been muddling along since the second quarter, and today's reports are further evidence of that,'' said Mark Vitner, a senior economist at Wachovia Securities in Charlotte, N.C. . The US Department of Commerce said consumer spending in May rose by 0.1 percent for the second straight month, while personal incomes rose by 0.3 percent. The University of Michigan, meanwhile, said its consumer sentiment index dropped by 2.4 points in June to 89.7. Economists sounded far less enthusiastic yesterday than they have in recent weeks, though many continued to express hope that the country's financial state will improve by the end of the summer. Analysts were most upbeat on June 16, when the Dow Jones industrial average soared to 9,318.96, its highest close in almost a year. They cheered again three days ago, when the Federal Reserve, in an attempt to spur growth, cut its key short-term interest rate to the lowest level in 45 years. Yet although the drop in consumer confidence in May was smaller than economists had anticipated, the news was enough to raise concerns on Wall Street. Stocks rose briefly in morning trading, but soon fell as investors digested the two reports. The Dow Jones industrial average fell 89.99 points, or 1 percent, at 8,989.05, while the Nasdaq Composite index lost 8.75, or 0.5 percent, to close at 1,625.26. The broader Standard & Poor's 500 index lost 9.6 points, or nearly 1 percent, to close at 976.22. While Wall Street has rallied over the past three months, the markets' tepid response to yesterday's news suggests investors are looking for more concrete indications that the economy is improving, Vitner said. ''The [post-war] recovery appears to be running out of gas,'' said Vitner. ''We're going to go through a spell of rather disappointing economic reports in the next few weeks.'' Other analysts, including Sung Won Sohn, chief economist of Wells Fargo & Co, said the economy should improve within two to three months as a $350 billion federal tax cut reaches consumers and as companies begin to borrow more, taking advantage of lower interest rates. But consumers have remained less optimistic about the economy in part because of the unemployment rate, which rose in May to a nine-year high of 6.1 percent. The 0.3 percent rise in personal income -- up from 0.2 percent in April -- was tainted, Vitner said, by accompanying data that showed virtually no increase in wages. And while the 0.1 percent rise in spending showed a willingness by consumers to open their wallets in a tough economy, the increase was less than the 0.2 percent economists had hoped for. Consumer spending is an important gauge of economic activity because it accounts for about two-thirds of the nation's gross domestic product. Low mortgage rates have prompted many homeowners to refinance, leaving them with money to spend on consumer goods. Spending on services increased by 0.5 percent in May, while spending on durable goods fell by 0.7 percent, the Commerce Department said. James Collins can be reached at collins@globe.com.