Confidence figures show slowdown in US recovery

CONSUMER confidence and housing sales figures released yesterday provided further evidence that the recovery in the US may be running out of steam, writes Diane Coyle.

New home sales surged 8.3 per cent in July, to 664,000 at an annual rate, but this was not enough to reverse an 11.4 per cent drop the previous month. Sales in June had fallen to a two-year low, partly because of rising interest rates.

Consumer confidence measured by the Conference Board's index declined unexpectedly in August. It fell to 89 from a July figure revised down to 91.3.

Reactions to the drop were mixed. James O'Sullivan, an economist at JP Morgan, said: 'For the most part, confidence is holding up. This index is only a couple of points lower than its peak in the expansion.' However, Stuart Parkinson of Morgan Grenfell said: 'Even though consumer confidence is still at a pretty high level, a number of indicators are pointing to a slowdown in growth later this year.'

The area of the US economy still showing unambiguous signs of strength is the labour market. Wall Street traders yesterday held fire in anticipation of the jobs and earnings figures to be published on Friday, just before the Labor Day holiday weekend.

US bonds had edged up by the close in New York, and the Dow Jones Industrial Average was 18.45 ahead at 3,917.30. The dollar fell slightly, from DM1.5813 to DM1.5765 and Y99.80 to Y99.61.