US consumer confidence has continued to weaken amid uncertainty over the fate of the economy and jobs in the wake of a possible war with Iraq.

But analysts said the consumer confidence index had not fallen as much as feared.

The index, released by the Conference Board - a private business research group - showed confidence levels had fallen to 79.0 in January, from 80.7 in December.

Things could get a lot worse before they get better Kevin Logan, DKW

The index has now fallen for seven of the last eight months, to its lowest level since November 1993.

But it did manage to stay above even gloomier forecasts for January of 78.1.

"With the threat of war looming, consumers have grown increasingly cautious about the short-term outlook," said Lynn Franco, director of the Conference Board's Consumer Research Center.

No respite

Economists warned that the ongoing pessimism was unlikely to show any signs of abating in coming weeks.

"Things could get a lot worse before they get better," said Kevin Logan, a senior economist with Dresdner Kleinwort Wasserstein in New York.

The consumer confidence index suggested expectations for the coming six months were even less optimistic in January than in December.

From the point of view of households, the situation really isn't as bad as some had feared John Herrmann, IDEAglobal

Those expecting business conditions to get worse rose from 11% to 14% in January, while those expecting conditions to improve fell from 21.1% to 17.7%.

"Clearly all the uncertainty regarding war and its impact on the economy is affecting how the consumer feels about the future," said Christine Chmura, chief economist at Chmura Economics & Analytics.

Nest building

However, economists said the housing market was still strong.

"With mortgage rates as low as they are now, consumers are still interested in buying homes," said Ms Chmura.

Government figures also released on Tuesday showed sales of new single-family homes had risen to new record levels in December after another 3.5% gain.

Sales of newly built homes for 2002 as a whole were 976,000, the highest since the Commerce Department began keeping the statistics in 1963.

John Herrmann, chief US economist at IDEAglobal in New York, said:

"That new home sales were able to post an all-time high in December reinforces the same view which is that from the point of view of households, the situation really isn't as bad as some had feared."

But Mr Herrmann added:

"However, the consumer is also saying that their anxiety about the future is increasing, reflecting anxiety over the war and uncertainty over domestic policy."