Confidence among American consumers unexpectedly fell this month to a two-year low as high petrol prices and a severe hurricane season took their toll on sentiment in the world’s largest economy.
The United States-based Conference Board research body reported that its confidence index fell to 85 from an upwardly revised 87,5 in September. It had been expected to rise to above 88 by financial markets, which promptly sold off the dollar against the euro and yen in disappointment.
There have been growing fears that spending by US consumers, one of the main drivers of the global economy in recent years, could be derailed by dearer energy prices and negative sentiment stoked by hurricanes Katrina, Rita and Wilma.
Last week, world oil prices, which fell to a three-month low of under $60 a barrel on Monday, rose by more than a dollar to $61,35 a barrel for US light crude futures. That remained well below the record $70,85 in the immediate wake of Katrina.
Economists were disappointed by the lack of a rebound from September’s weak number. ”Energy prices have not come down at the consumer level as much as they have at the wholesale level,” said James Knightley of ING Financial Markets.
”Nonetheless, with consumer energy bills likely to come down gradually and employment prospects remaining pretty good, we believe that confidence is likely to recover in the coming months.”
In spite of weaker confidence, economists expect the Federal Reserve to continue to raise interest rates from its current 4,75% to rein in inflation, which has been pushed up by surging energy costs.
There was good news from the ailing eurozone as German business confidence unexpectedly surged to a five-year high, suggesting the bloc’s largest economy may be recovering from its long stagnation. The country’s respected think-tank IFO released its closely watched monthly index of business conditions, which jumped to 98,7 from 96,0 last month, fuelled by a sharp improvement in the firms’ assessment of expectations for the next six months.
Signs that Germany’s main political parties are about to form a coalition government also helped dispel the uncertainty following the inconclusive September 18 elections, it added.
IFO said the German economy appeared to be on a sounder footing, although the government and most institutes are expecting economic growth of only 0,8% this year and 1,2% next. — Â