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Iraq fears dent US consumer confidence

US consumer confidence declined this month to a 10-month low because of falling stocks, weak employment numbers and a growing concern about a potential war with Iraq.

The Conference Board's consumer confidence index fell to 93.3 this month from 94.5 last month. It was the fourth straight monthly decrease and due to the weakest reading of present conditions in eight years.

Dwindling optimism may threaten the recovery because consumer spending accounts for two-thirds of the economy. Wal-Mart Stores Inc, the world's largest retailer, said sales this month will rise at close to the lower end of its forecasts. Federal Reserve policy makers left interest rates unchanged Tuesday, while acknowledging the prospects of war with Iraq may hinder the economy's recovery.

"This was not a report that said consumers were excited about their financial prospects and thus ready to spend, spend, spend," said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania.

Central bankers voted 10-2 to leave their benchmark overnight bank lending rate at a 41-year low of 1.75 percent because they expect productivity growth to help boost the economy.

Still, "considerable uncertainty exists about the extent and the timing of the expected pickup in production and employment, owing in part to the emergence of heightened geopolitical risks," they said in a statement accompanying their decision.

Fed Governor Edward Gramlich and Federal Reserve Bank of Dallas President Robert McTeer dissented, arguing for a rate cut instead. That's the first time since May 1998 that two Fed officials have dissented.

The confidence index was the lowest since 84.9 in November.

Economists had expected a reading of 92.1 after August's previously reported 93.5, based on the median of 58 forecasts in a Bloomberg News survey.

The component of the index that measures consumers' assessment of their present situations fell to 88.5 this month, the lowest since May 1994. A gauge of expectations for the next six months rose for the first time since May, to 96.5 from 95.5.

Last week was the fourth in a row for stocks to decline, with the Dow Jones Industrial Average falling to an almost two-month low.

The Dow fell 189 points, or 2.4 percent, to close at 7683, while the Standard & Poor's index of 500 stocks declined 14 points, or 1.7 percent, to close at 819.

The Conference Board surveyed 5,000 households during the first three weeks of this month.
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