Sun, Mar 03, 2002 - Page 11 News List

University of Michigan Sentiment Index fell to 90.7


US consumer confidence fell in February, the first decrease in five months, as a decline in stock values clouded optimism about an economy that otherwise is showing signs of recovery.

The University of Michigan's final consumer sentiment index dropped to 90.7 for the month from 93 in January. A preliminary estimate had put the index at 90.9 in February. Reports on incomes, spending, manufacturing and construction indicate that the US is pulling out of a recession that began a year ago.

The slip in confidence may reflect questions about the security of retirement plans following deceptive accounting practices at Enron Corp, analysts said. The S&P's 500 Index on Jan. 29 posted its largest drop since September as investors expressed concern that companies misstated profits.

"The consumer chose to focus on the financial market frailty rather than the pronounced gains in economic activity," said Richard Yamarone, chief economist at Argus Research Corp. in New York. "Luckily, consumers rarely do what they say, and spending continues to advance despite this somewhat softer number."

Consumer outlays rose 0.4 percent in January, a larger than expected increase, the Commerce Department reported today. Incomes rose 0.4 percent, the largest gain in six months. Spending grew in the fourth quarter of 2001 at the fastest pace in 3 1/2 years.

Manufacturing ended a 1 1/2-year slump in February, based on an industry survey. The Institute for Supply Management said its factory index rose to 54.7 last month from 49.9 in January. A reading of more than 50 signifies growth.

Construction spending rose 1.5 percent in January, more than any other month in a year, paced by increased work on houses and highways, the Commerce Department said in a separate report.

Analysts had expected a reading of 91 in the sentiment index, based on the median of 43 forecasts in a The current conditions index, which reflects Americans' perception of their financial situation and their willingness to spend, rose to 96.2 from 95.7. The expectations index, based on optimism about the next one to five years, fell to 87.2 from 91.3, which was a 14-month high.

Stocks rose after the factory, consumer and construction reports, a sign that consumer misgivings may be short-lived. The S&P 500 gained 15 points, or 1.4 percent. The NASDAQ Composite Index rose 41 points, or 2.4 percent.

The Michigan index had fallen to an eight-year low of 81.8 in September, when the terrorist attacks brought the economy to a halt. It grew in the following four months.

Consumer spending grew at a 6 percent annual rate during the fourth quarter, the fastest since the second quarter of 1998.

Sales at retailers excluding auto dealers rose more in January than any other month in almost two years, government figures showed this month.

Sales at US retail stores open at least 12 months rose 5.2 percent in January from a year earlier, the biggest gain since April 2000, according to the Bank of Tokyo-Mitsubishi Ltd.

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