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News > Economy
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U.S. sentiment shaky
graphic October 26, 2001: 11:16 a.m. ET

A consumer sentiment index is revised downward, while home sales fall.
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  • Durable goods orders, existing home sales plunge - Oct. 25, 2001
  • Federal Reserve cuts interest rates for 9th time in 2001 - Oct. 2, 2001
  • Recession could follow terror attacks, but it might not last long - Sept. 20, 2001
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  • Home sales report
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    NEW YORK (CNNmoney) - A closely watched indicator of consumer confidence was revised lower for October, a published report said Friday, while new home sales fell in September, reinforcing the notion that last month's terrorist attacks have shaken Americans' feelings about the economy, at least temporarily.

    The University of Michigan cut its reading of consumer sentiment to 82.7 for October from an initial reading of 83.4, according to a Reuters report, though that is still better than September's reading of 81.8. Economists surveyed by Briefing.com expected the sentiment index to be revised to 83.0.

    Separately, the Commerce Department reported new home sales fell 1.4 percent in September to a seasonally adjusted 864,000 annual rate, down from a revised 876,000 in August, but slightly above forecasts for a rate of 860,000. The rate was the lowest since August 2000.

    "Consumers at this juncture are fighting the forces of economic slowdown with patriotism," said Anthony Chan, chief economist with Banc One Investment Advisors. "As economic conditions continue to deteriorate, this challenge will become greater."

    U.S. stocks turned briefly downward after the reports before bouncing back -- as they've done all week after bad news -- while U.S. Treasury bond prices were mixed.

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    The Federal Reserve has cut interest rates nine times this year - twice since the Sept. 11 attacks - in a bid to keep consumers spending and prevent a recession in the world's largest economy. Consumer spending fuels two-thirds of the economy and was one of the last defenses, along with a strong housing market, keeping a recession at bay.

    Even before the attacks, however, consumer confidence was weakened by hundreds of thousands of job cuts, the result of a year-long slowdown in spending by businesses on capital improvements. The shock of the attacks added to the bunker mentality, discouraging spending on big-ticket items -- such as houses.

    The weak reading of new home sales comes a day after a real estate group reported that existing home sales tumbled 11.7 percent last month. Economists expect housing to continue to weaken as job cuts mount, though the market at least has the support of low mortgage rates.

    "If the economy turns up by next spring, we should see housing doing better by then," said Sung Won Sohn, chief economist at Wells Fargo & Co. "Between now and the end of the year will be the worst period for housing."

    A hopeful sign for housing is a survey conducted by the Conference Board, a New York research firm, which found that, while 52 percent of consumers think the attacks will trigger a recession, 90 percent of them say they don't plan to postpone major purchases, such as a home, car or major appliance.

    "While the purchasing intentions of consumers have not changed and remain quite upbeat, it remains to be seen whether these current attitudes translate into actual purchases," said Lynn Franco, director of the Conference Board's Consumer Research Center.

    For CNN's economic calendar, click here

    The University of Michigan's expectations index, which tracks consumers' attitudes about the coming year, rose to 75.5 in October from 73.5 in September, Reuters said, revised from a preliminary reading of 77.9.

    The current conditions index, which gauges Americans' views of their present financial situation, fell to 94.0 in October from 94.6 in September, according to the report, revised from an earlier reading of 92.1.

    The University of Michigan consumer sentiment survey is based on roughly 500 telephone interviews with Americans across the country. The mid-month reading captures roughly 250 of that month-end total. graphic


    - from staff and wire reports

      RELATED STORIES

    Durable goods orders, existing home sales plunge - Oct. 25, 2001

    Federal Reserve cuts interest rates for 9th time in 2001 - Oct. 2, 2001

    Recession could follow terror attacks, but it might not last long - Sept. 20, 2001

      RELATED LINKS

    Home sales report





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