Shobhana Chandra and Bob Willis
October 17, 2008
Confidence among U.S. consumers fell by the most on record and single-family housing starts hit a 26- year low, posing an increasing threat to household spending that accounts for more than two-thirds of the economy.
- A d v e r t i s e m e n t
The Reuters/University of Michigan preliminary index of consumer sentiment fell to 57.5 this month from 70.3 in September. The measure averaged 85.6 last year. Construction of single-family homes dropped 12 percent last month to a 544,000 annual rate, the Commerce Department said in Washington.
Today’s figures show that the tightening credit crunch has spurred a further step down in the three-year housing recession. Falling property values, along with the crash in stocks, threaten to cause the first decline in consumer spending since 1991, and put pressure on the Federal Reserve to cut interest rates again this month.
“Even gasoline-price decreases were overpowered by the massive destruction of wealth,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York who used to work at the Fed. “Things are pretty awful in the economy and that should make itself felt through weaker consumer spending.”