US consumer confidence at a record low this month

The value of the dollar fell again last Friday as US consumer confidence has reduced the chances of the Federal Reserve raising interest rates.

US consumer confidence was the weakest this month since Jimmy Carter and the primary index of consumer confidence Reuters/University of Michigan index fell to 59.5, compared to the 2007 average of 85.6.

The unexpectedly drop in consumer sentiment set a new 28-year low, which is mirrored in the volatile housing market as this latest setback now eclipses the glimmer of hope shown in a report indicating a rebound in building permits and construction for new homes, which did trigger the dollar.

As consumer sentiment is closely aligned to consumer spending levels, it is difficult to predict the way in which confidence will increase in the aftermath of the credit crunch and the spiral of decline.

In a period where the US central bank has paused reducing rates, the dollar has further lost out to the euro.

The low levels of confidence are likely to continue to effect sending in a period of negative GDP growth which is a trend that is likely to continue through the next couple of months especially as domestic consumer spending accounts for 76 percent of US GDP.

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