US consumer optimism plunges to 27-year low
Published 24/02/2010 | 05:00
US consumers are more pessimistic about current economic conditions than at any time in the past 27 years, the latest survey shows.
But markets were more taken aback by a fall in general confidence this month to the lowest level in 10 months, as consumers worried about poor job prospects.
The sharp fall in the Conference Board research group's index, to 46 from 56.5 in January, comes as Federal Reserve chairman Ben Bernanke appears before Congress today. It reinforces expectations that he will repeat the central bank's pledge to keep interest rates low for "an extended period".
German business confidence unexpectedly fell for the first time in 11 months in February as the coldest winter in 14 years hurt retail sales and construction.
While the bad weather played a part, Nick Kounis, chief European economist at Fortis Bank in Amsterdam, said the survey also adds to evidence that the recovery in Germany and the eurozone is losing pace.
"Exports are still powering ahead, but domestic demand is sluggish and will remain so for an extended period."
Italian consumer confidence unexpectedly declined for a second month as job losses fuelled concern about the economic outlook. In France, consumer spending dropped in January after the government scaled back its car scrappage scheme.
Bank of England governor Mervyn King appeared before a parliamentary committee yesterday and said the UK central bank is prepared to do whatever is best to prevent a relapse in the economic recovery.
"Monetary policy can either be more expansionary or more contractionary as the situation demands. We stand ready to do whatever seems appropriate," Mr King said.
Former Treasury adviser Roger Bootle urged the central bank to keep sterling weak. "It should keep a close look on the exchange rate, and if the pound looks like rising quite significantly, which is a real danger, it should do even more quantitative easing -- and then do even more," he said.
Jamie Dannhauser at Lombard Street Research said efforts to improve the UK banks' financial position were undoing much of the stimulus from money creation.
"While such changes may leave the banking system in better shape over the medium term, they limit the chances of a sustained recovery in the UK. Simply put, the financial accelerator has gone into overdrive -- offsetting much of the beneficial impact of Bank of England asset purchases," he said.