Americans' Confidence Weakens by Most in Two Years


Americans' confidence dropped by the most since Hurricane Katrina two years ago, in the first report to reflect the credit-market turmoil in August.

The survey underscores the Federal Reserve's concern that risks to the six-year economic expansion have "increased appreciably.'' Separate figures showed home prices suffered the biggest decline since at least 2001.

The New York-based Conference Board's index retreated to 105 this month, from 111.9 in July. Economists had forecast a reading of 104, according to a Bloomberg survey. Property values in 20 metropolitan areas decreased 3.5 percent in June from a year earlier, according to a report today by S&P/Case-Shiller.

`"Consumers are obviously paying attention to what's going on and are a little worried by it,'' said Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina. ``We are not expecting them to spend the way we thought they would a few months ago.''

Wachovia economists accurately predicted the confidence figure.

The housing recession is making it harder for Americans to tap home equity to finance the spending that accounts for 70 percent of the economy. A slowdown in hiring and slimmer pay raises may further weaken consumer sentiment and buying power.

`"The things that are weighing on the consumer are getting pretty imposing,'' said Gregory Miller, chief economist at SunTrust Banks Inc. in Atlanta, which last week announced job cuts. "The equity that he's generated in his house over the years has been undercut'' by falling prices.


Bloomberg
8/28/2007 1:33:22 PM