The Conference Board's Consumer Confidence Index plunged to 98.2 in August, down by 7.5 points from the revised 105.7 in July. The index retreated from a two-year high in July and was considerably below economist's expectations of 103.0. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
Confidence fell across both portions of the Conference Board index. The Expectations portion of the index, a measure of future economic activity, had the largest decrease, dropping 8.7 points to 96.6 in August.
The Present Conditions index declined to 100.7 in August from 105.3 in July. This index measures how consumers perceive the current state of the economy.
The University of Michigan's Consumer Sentiment Index, a comparable index, also dropped in August, falling to 95.9 from 96.7 in July. The component indices were mixed. The Expectations index was 3.0 points lower in August at 88.2, while the Present Conditions portion increased to 107.9 from 105.2 in July.
Several factors are likely responsible for decreased consumer confidence. Labor market reports in the last couple of months have been weak. Gasoline prices are relatively high and are perceived to be unstable. The stock market has been unsteady and trending downward for most of the year. In addition, household debt is high and weighs on consumer spending.
However, a setback in consumer confidence is not unusual as the economy continues to gradually recover and job growth improves over time. Future confidence reports are necessary to determine if August's report is the start of a downward trend or just a temporary decline. Since consumer spending accounts for two-thirds of the U.S. economy, consumer confidence is a closely watched economic indicator.
Sources: www.conference-board.com
www.economy.com
