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Santa May Get Sacked by Grumpy Consumer

Anyone paying attention to U.S. consumer is betting on a bleak holiday season.

While inflation concerns of the spring and summer have abated, the troubled housing sector, unsteady stock market and swelling unemployment continue to batter Americans' collective financial psyche and crimp spending. The Federal Reserve is expected to slash its benchmark interest-rate target once again on Wednesday to help get the financial system back into gear -- and lending to buyers and sellers again, at lower rates. But with all the headwinds facing the U.S. consumer, his gloominess is unsurprising.

"A few months ago Santa Claus couldn't afford the gas to come; now his credit card is maxed out," says Vicki Bryan, senior analyst at GimmeCredit.

The Conference Board on Tuesday said it was unsurprising that its consumer-confidence index dropped further, though the extent of the decline was far worse than analysts expected. In October, the consumer-sentiment reading was 38, down 38% from the previous month and down 60% from the year-ago level. Analysts had expected a reading of 52, on average.

Lynn Franco, director of the Conference Board's consumer research center, attributed the decline to the global financial crisis, which has saturated most media coverage for the past few weeks.

"Looking ahead, consumers are extremely pessimistic," says Franco, who notes that Americans' outlook for employment, inflation and financial health has also become worse. "[T]his news does not bode well for retailers who are already bracing for what is shaping up to be a very challenging holiday season."
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