- The Washington Times - Wednesday, August 28, 2002

Consumer confidence in the U.S. economy sank to a nine-month low in August, the third straight monthly decline. Yet in July, demand surged for big-ticket goods, such as cars and computers.
The latest batch of economic news yesterday offered mixed signals to the economy's direction and suggested that while consumers may be growing more nervous, businesses might be feeling a little better, analysts said.
Still, it is the actions of consumers and businesses their willingness to spend and invest in the months ahead that will shape the recovery. Optimists are betting that consumers will keep their pocketbooks and wallets open and that businesses will slowly step up investment. Pessimists worry that they won't.
"It seems the economy is at an inflection point, a turning point, where it either picks up momentum from the second quarter or loses momentum," said Lynn Reaser, chief economist for Banc of America Capital Management.
Miss Reaser and most other economists don't foresee the economy sliding back into a feared "double dip" recession, but some aren't ruling one out.
The Conference Board, a private research group, reported that its Consumer Confidence Index fell to 93.5 in August, the lowest level since November, from a revised 97.4 in July. The showing, much weaker than the 97 reading analysts forecast, raised questions about consumers' appetite for spending in coming weeks.
"For the economy to start accelerating sharply, consumer confidence will have to start improving," said economist Joel Naroff of Naroff Economic Advisors.
The index is looked at by economists to try to gauge the behavior of consumers, whose spending accounts for two-thirds of economic activity in the United States.
But Federal Reserve Chairman Alan Greenspan has said that using confidence measures to predict consumer spending patterns is risky.
Confidence fell in June and July, but retail sales posted solid gains in those months as free-financing offers, especially on cars, discounting and other incentives motivated buyers.
Home sales in July also were strong, helped by low mortgage rates.
Merrill Lynch economist Gerald Cohen said that although back-to-school sales have been sluggish, that should be more than offset by what he expects will be robust auto sales for August.
In a second report released yesterday, orders to U.S. factories for costly manufactured durable goods jumped by 8.7 percent in July, the largest gain since October, suggesting that businesses felt more optimistic about the appetite for their products.
The advance came after a 4.5 percent drop in June.
July's performance was far stronger than analysts had predicted. Their forecast gains ranged from 1.4 percent to 2.7 percent.

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