US consumer confidence sinks

Consumer confidence dropped last week as Americans' views of the economy plunged to the lowest level since the recession. The Bloomberg Consumer Comfort Index was minus 46.8 in the period to July 24, the lowest since May, compared with minus 43.3 the prior week. Six percent of those surveyed said the economy was in good shape, the fewest since April 2009. Seniors and the unemployed were among those showing the most negative readings, a sign that partisan wrangling over the nation's budget deficit was jarring those likely to be affected by cuts in spending. Unemployment above 9 per cent, falling home prices and a rebound in gasoline costs may be weighing on sentiment overall, posing a risk for consumer spending. "Given the combustible combination of weak economic data and the policy standoff between Democrats and Republicans, conditions are ripe for consumer sentiment to breach the 2011 low," said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. Article continues below "The high probability of a downgrade to the credit rating of the US is likely to exacerbate the general sour mood of the public over the next several months." The comfort gauge reached a nine-month low of minus 49.4 in May after the price of regular gasoline climbed to $3.99 (Dh14.64) a gallon. Labour market Another report yesterday indicated weakness in the labour market may be starting to abate. Applications for unemployment insurance payments declined 24,000 in the week ended July 23 to 398,000, the fewest since April. Economists forecast a drop to 415,000 claims, according to the median estimate in a Bloomberg News survey. The number of contracts to purchase previously owned homes unexpectedly rose in June as buyers tried to take advantage of lower prices and borrowing costs, figures from the National Association of Realtors also showed yesterday. The 2.4 per cent rise in the index of pending home resales followed an 8.2 per cent May gain. The rise in May didn't translate into an improvement in sales as contracts were cancelled due to stricter lending rules and low appraisal, the group said earlier this month. All three of the comfort index's subcomponents fell last week. The gauge of Americans' views of the economy, which is the difference between those with positive versus negative opinions, sank to minus 88.1 from minus 83.7 the prior week.