- Confidence among American consumers has collapsed, making
it likely that the country will spiral into recession.
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- According to key economic indicators published yesterday,
Americans' love affair with their credit cards has come to a halt. The
consumer confidence index, which surveys 5,000 households across America
to determine how happy and prosperous people are feeling, experienced its
biggest drop since Saddam Hussein invaded Kuwait in 1990.
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- It fell from 114.0 to 97.6, twice what Wall Street had
predicted. The response of Americans to the terrorist attacks seems to
have been to take to their sofas, pick up the television remote control
and sit on their wallets and purses.
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- Empty cinemas and passenger jets, hotels only a third
full and slumping sales of cars and electronics goods show that Americans
were terrified by the attacks and are worried about the future. One of
the only signs of an increase in spending was among video rental shops,
which recorded a particular surge in the popularity of action films in
which America triumphs.
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- As a sign of the White House's increasing concern over
the state of the economy, President Bush will visit airline workers in
Chicago tomorrow to express solidarity with the worst affected
sector.
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- Ari Fleischer, his spokesman, said: "It is important
to send a signal to Americans to resume lives, to go to restaurants, to
go to movies, to enjoy recreation, to fly, to conduct the commerce of the
nation."
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- Mark Zandi, a leading economist, said: "A bunker
mentality is descending on consumers and investors. Everyone is battening
down the hatches."
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- More worrying for the White House and the global economy
is that the latest index measured only part of the period after the
terrorist
attacks on the World Trade Centre and the Pentagon. Next month's figures
are likely to be even worse.
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- Lynn Franco, director of the Consumer Research Centre
of the Conference Board, which conducts the surveys, said: "The
economy
faces tougher times ahead. While consumers have managed to keep the US
out of a recession for several years now, that soon may no longer be the
case."
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- The survey showed that Americans, already worried by
the prospect of redundancies, had had any optimism about their own affairs
severely dented. The hardest hit industries have been the airlines and
hotel businesses, especially those connected to New York and Washington,
but the index suggests that no section of the economy will escape
undamaged.
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- The White House has been talking about putting together
a package of tax cuts and other spurs to the economy, but Alan Greenspan,
chairman of the Federal Reserve Board, advised members of Congress not
to act in haste.
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- He said that the American economy was essentially solid
and predicted it would recover from the effects of the terrorist attacks
and the pre-existing slump. Max Baucus, chairman of the Senate's finance
committee, said it might not be necessary to put together a stimulus
package
at all.
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- Wall Street actually reacted positively to the consumer
confidence figures, anticipating that they could lead to another aggressive
cut in interest rates.
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