U.S. consumer confidence drops

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Tuesday, July 26, 2005

The confidence of American consumers in their economy has slipped unexpectedly in July after it had risen the previous three months.

The Consumer Confidence Index dropped from 106.2 in June to 103.2 this July, the Conference Board said in New York. Analysts blame it on Amercians' increased fear over job security, wage perspectives, and rising gas prices.

But Lynn Franco, director of the board's Consumer Research Center, is unconcerned: "The overall state of the economy remains healthy and consumers' outlook suggests no storm clouds on the short-term horizon."

In the last months, several large American corporations have announced job cuts. Among them are Eastman Kodak, Hewlett-Packard, and Kimberly-Clark.

Private consumer spending is considered to be the backbone of the U.S. economy since it accounts for two-thirds of its Gross Domestic Product. However, in the last few years, the correlation between consumer confidence and actual retail sales has been questioned since consumers were spending money even when survey figures said they wouldn't.