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NEW YORK - The University of Michigan's preliminary September consumer sentiment index fell to 86.2, remaining at its lowest level since November 2001, from a final reading of 87.6 in August, market sources said on Friday.
Declines in confidence often raise worries about future consumer spending, which drives about two-thirds of the U.S. economy. But for most of the year, sales of autos and homes have maintained a record pace despite weakening confidence.
That was true once again in August when retail sales surged a surprisingly strong 0.8 percent after a 1.1 percent gain the prior month -- despite falling confidence during both of those months. Excluding the expected strength from autos, fueled by generous financing deals, sales were up a solid 0.4 percent.
An economist at Lehman Brothers still forecasts auto and housing sales, the main source of the economy's current growth, to weaken enough in coming months to prompt the Fed to slash rates by 50 basis points by year end, Reuters reports.
The preliminary University of Michigan consumer sentiment survey is based on telephone interviews with roughly 300 Americans across the country on personal finances and business and buying conditions. It is rounded out to 500 calls by month's end.