August 30, 2011 / 3:10 PM / 8 years ago

WRAPUP 5-U.S. consumer confidence crumbles to 2-year low

 * Consumer confidence sags to 44.5 - Conference Board
 * Home prices fall 0.1 pct in June vs May
 * Confidence index lowest since recession-bound April 2009
 (Adds stock market close)
 By Leah Schnurr
 NEW YORK, Aug 30 (Reuters) - U.S. consumer confidence
plunged in August to its lowest since the 2007-2009 recession,
after a bruising battle over the U.S. budget slammed stock
prices and pushed the nation to the brink of default.
 Tuesday's data kept alive concerns the United States could
slide back into recession, spurring investors to buy government
bonds on bets the Federal Reserve would try harder to push down
borrowing costs.
 The private-sector Conference Board said its index of
consumer attitudes sank to 44.5, from a downwardly revised 59.2
in July. The August reading was the weakest since April 2009,
when the country still languished in recession, while the drop
was the largest since October 2008.
 "What we are effectively going through is a crisis of
confidence," said Tom Porcelli, an economist at RBC Capital
Markets in New York.
 Economists had expected a much-less-pronounced decline.
 Consumers' flagging confidence might lead them to shut
their wallets, although retail sales data has not pointed in
that direction yet.
 So far, data from industrial production to employment have
been consistent with a slow-growth scenario rather than an
outright contraction in economic output. But economists are
watching closely for signs of a fresh downturn and will focus
sharply on a reading on U.S. employment in August on Friday.
 "There is basically nothing for consumers to be confident
about," said Gennadiy Goldberg, a fixed income analyst at 4CAST
in New York.
 Stock markets slid sharply in early August as investors
were shaken by the politically contentious fight over cutting
the U.S. budget and raising the nation's debt limit.
Discouraged by the political process, Standard & Poor's
stripped the nation of its top-notch AAA credit rating.
 The consumer sentiment data weighed on U.S. stocks for most
of Tuesday's session, although the Standard & Poor's 500 Index
.SPX closed higher.
 Graphic-U.S. confidence:
 Graphic-U.S. home prices:
 Instant view on confidence:                [ID:nN1E77T0IK]
 Instant view on home prices:               [ID:nN1E77T0AH]
 Table-U.S. confidence:                     [ID:nN9E7H701P]
 Table-U.S. home prices                     [ID:nCLATJE724]
 Worries over the economy led the Fed in early August to
consider new steps to support growth, like tying the path of
interest rates to a specific unemployment level, minutes of the
central bank's Aug. 9 meeting released on Tuesday showed.
 At that meeting, the central bank decided to announce that
it expected to hold rates near zero until at least mid-2013.
 While that decision drew three dissents, the most in nearly
20 years, the minutes showed some officials wanted even bolder
action. Chicago Federal Reserve Bank President Charles Evans
made clear in an interview with CNBC that he would have
preferred a stronger course of action. For details see
 The high level of joblessness is weighing on sentiment and
holding the economy back. Friday's jobs report is expected to
show the unemployment rate held at 9.1 percent in August.
 The Conference Board data suggested things may be getting
worse, not better, with an index gauging how difficult it is to
find a job hitting its highest level since November 2009.
 A separate report showed U.S. single-family home prices
fell slightly in June, the latest sign the economy's recovery
will not be able to count on help from the housing sector.
 The S&P/Case-Shiller composite index of 20 metropolitan
areas slipped 0.1 percent from the previous month on a
seasonally adjusted basis. A Reuters poll of economists had
expected prices to be unchanged.
 Prices in the 20 cities fell 4.5 percent from a year ago,
better than expectations of a 4.6 percent decline.
 An excess supply of homes, ongoing foreclosures, tight
credit and weak demand have kept the housing market on the
ropes and helped to mute the broader economic recovery.
 "Basically this is just more confirmation that housing is
moving sideways," said Brian Jones, an economist at Societe
Generale in New York.
 (Additional reporting by Emily Flitter in New York and Pedro
Nicolaci da Costa in Washington; Writing by Jason Lange in
Washington; Editing by Neil Stempleman and James Dalgleish)

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