Economy shows more signs of cooling down

Associated Press

WASHINGTON — Consumer confidence fell in November to its lowest level in a year, and the nation’s factories reported a sharp drop in demand in October — further signs of continued slowing in the once red-hot U.S. economy.

The news heightened fears that the moderating economy will hurt profits for a broad range of U.S. companies, including technology companies like Dell and Amazon.com, and sent the Nasdaq composite index reeling yet again Tuesday to its lowest close in more than a year.

The Commerce Department reported Tuesday that orders for big-ticket manufactured goods fell 5.5 percent last month, led by a big decline in orders for airplanes and the biggest plunge in orders for primary metals in almost two years.

Meanwhile, the Conference Board reported in New York that its consumer confidence index slipped to 133.5 in November, its lowest reading since October 1999 and a significant decline from its record level of 144.7 registered in May.

Conference Board economist Lynn Franco said a nine-point drop in the index reading in just the past two months "underscores an anxiety about future economic conditions." She said it may reflect "concern about the still-unresolved presidential election."

"The election that never ends has still not ended, gasoline prices are sky high, heating costs are surging and the stock market is wandering around as if it were lost," said Joel Naroff, chief economist of his own forecasting firm in Holland, Pa. "There is some real concern creeping into the consumer’s thinking about the future."

But Mike Weiner, a managing director at Banc One Investment Advisors, said the market response "just looks like a continuation of the nervousness we’ve seen for a while."

"A lot of the tech stocks are still fairly expensive because of the run they’ve had and they’re not attracting new money," he said. "There are still too many questions about future earnings."

The Nasdaq composite index ended the session down 145.51, or 5 percent, at 2,734.98. It was the index’s lowest close since Oct. 19, 1999, when the index stood at 2,688.18.

Private economists attributed the consumer confidence downturn to a variety of factors they said are unsettling consumers as the Christmas shopping season begins in earnest.

Most analysts said, however, they doubt that the decline so far is enough to derail consumer spending during the all-important holiday sales season, especially since unemployment remains at a three-decade low of 3.9 percent.

Analysts said they also do not believe the drop in orders for durable goods, — items expected to last three or more years —represents a serious threat to the current record-breaking economic expansion, now in its 10th year.

They predicted the Federal Reserve is still on track to achieving its so-called soft landing, in which Fed increases in interest rates slow growth enough to keep inflation under control without bringing on recession.

"A soft landing isn’t a painless landing," said Martin Regalia, chief economist at the U.S. Chamber of Commerce. "There will be some pain in some sectors."

Regalia said some of that weakness is already being felt in interest-rate sensitive sectors of the economy such as autos and business investment.

Copyright ©2000 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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