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COPYRIGHT 2005 Voxant Inc.
Original Source: NIGHTLY BUSINESS REPORT
PAUL KANGAS, NIGHTLY BUSINESS REPORT ANCHOR: It looks like sky high gasoline prices are tanking consumer confidence. New data shows Americans` expectations for the future are slipping and economists fear that could lead to a slowdown in spending.
SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Also sounding the economic alarm bell today, Fed Chairman Alan Greenspan. He tells a Fed conference he`s worried about what happens when interest rates head higher and risks for investors head that way, too.
KANGAS: Drug maker Merck could be getting ready to rid itself of some lawsuits over its Vioxx painkiller. But it may not be doing that in a courtroom. We`ll explain.
GHARIB: And tonight`s "market monitor" guest says it`s time to give the small guys a try on Wall Street. He`s Alexander Paris, head of equity research at Barrington Research Associates.
KANGAS: I`m Paul Kangas.
GHARIB: And I`m Susie Gharib. This is NIGHTLY BUSINESS REPORT for Friday, August 26.
Good evening, everyone. Red flags about the economy, both now and down the road, were the talk on Wall Street today. Stocks fell on concerns about a big drop in consumer sentiment and comments about the housing market by Federal Reserve Chairman Alan Greenspan. As Erika Miller reports, economists blame consumers` growing pessimism on skyrocketing gasoline prices.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: For many months now, motorists have been grumbling about rising gasoline prices. But the latest sentiment data has economists concerned that consumers are moving beyond words to action. They fear Americans are starting to cut discretionary spending to cope with higher energy costs.
RICHARD YAMARONE, DIRECTOR OF ECONOMICS RESEARCH, ARGUS: We used to complain about them, that is higher prices. We don`t really like it that much, but, now it`s "hey wait a second. Maybe we have to start cutting and trimming some of our spending habits a little bit.
MILLER: It`s the University of Michigan consumer sentiment survey that`s raising red flags. It showed a sharper than expected drop in August, falling to 89.1 from 96.5 in July. That is the largest decline since February. Economists say what is particularly troubling is a decline in consumers` optimism about the future. The expectations component of the survey fell to 76.9 in August, from 85.5 in July. Economists say that may mean consumers view high fuel costs as a long-term problem for the economy. The average price of regular unleaded gasoline hit a record percent $2.61 this week, a 40 percent increase from last year. As a result, economists are betting the next consumer confidence figure will be even lower.
STEVE WIETING, SR. ECONOMIST, CITIGROUP: We`ve lost about 10 percent of our incomes gain last year. During these peak summer months, it may be approaching 20 percent of the income gain. So, I think that you could see some softer readings in the consumer sentiment readings, certainly in the month of September.
MILLER: Over the past few years, there hasn`t been much correlation between consumer sentiment and spending. But some analysts say that`s starting to change as fuel prices continue to hit new highs.
YAMARONE: I don`t think it`s at a calamitous stage where hey, families are gathering around the table saying we`re going to cancel our trip to Disney world because it costs an extra $25 to fill the tank. But I do suspect that consumers are pulling back on their superfluous spending.
MILLER: No one is expecting consumer spending will dry up completely. But some economists predict retail sales will be weak in August and September, typically the biggest selling season after Christmas. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
KANGAS: Fed...
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