Attacks knock US consumer confidence

US consumer confidence fell sharply in September, suffering its largest one-month drop since the Gulf crisis, according to a survey that captured part of the economic shock from the September 11 attacks on New York City and the Pentagon.

The eroding labour market and weakening business conditions weighed heavily on consumers, today's report said, threatening to undermine retail spending, one of the few remaining tethers of strength in an economy a majority of economists believe is already in recession.

The Conference Board, a New York-based private business research group, said its monthly index of consumer confidence fell to 97.6 in September, from a downwardly-revised 114.0 in August. Wall Street economists had forecast a fall to 105.1.

'As the economic ramifications of September 11 continue to reverberate in the coming weeks and months, and the number of layoffs continue to rise, the economy faces tougher times ahead,' said Lynn Franco, director of the Conference Board's Consumer Research Centre, in a statement. 'While consumers have managed to keep the US out of a recession for several years now, that soon may no longer be the case.'

The Present Situation Index, which measures consumer views of the economy right now, extended its slide, falling to 125.2 from a revised 144.5 in August. The Expectations Index, which gauges consumers' outlook for the next six months, slid to 79.2 in September from a revised 93.7 in August.

In a harbinger of rising unemployment in the months ahead, 18.5% of respondents said jobs were 'hard to get,' compared to 16% in August. The category is closely linked with trends in the unemployment rate.

Today's report is likely to cement expectations that the Federal Reserve, which has already cut its benchmark interest rate eight times this year, will cut rates again at its October meeting to try to ward off a recession.

* US existing home sales surged 5.8% to a record high in August but the September 11 terrorist attacks are now beginning to take a toll, an industry association said today. The increase beat Wall Street expectations for a rise of 0.4%.