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May 30, 2000

US consumer confidence up sharply
By Reuters, Financial Times

Attention all shoppers...Weiss comments

WASHINGTON -- US consumer confidence rebounded sharply in May to its highest level in four months as low unemployment outweighed higher interest rates and financial market volatility, the Conference Board said on Tuesday.

The group's Consumer Confidence Index stood at 144.4, up from an upwardly revised 137.7 in April and its highest since a record 144.7 in January. The present situation index rose to 183.1, up from 179.8 in April, while the outlook for conditions six months from now rose to 118.7 from 109.7.

"With unemployment at a 30-year low and the short-term Conference Board forecast projecting favourable labour market conditions, confidence is expected to remain strong through the summer," said Lynn Franco, director of the Board's consumer research centre. "Volatile financial markets and interest rate hikes are not expected to have a significant impact..."

The Conference Board, a business research group financed by major corporations, compiles the index from a survey of 5,000 households. Economists had expected, on average, for the May index to ease to 135.9.

This is yet more evidence that inflation pressures mount even as the Fed boosts interest rates. Consumers clearly are not phased in the least by warnings that their out of control spending habits will lead the economy into heavy inflation.

Consumer spending is rallying stronger than the stock market these days, and the Federal Reserve is sure to apply the breaks. Though some Wall Street analysts are bound to expect a small or no hike in the interest rate because of the recent volatility in the market, the Fed will have no choice but to try to stave off inflation with at least a half point hike.

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