Consumer Confidence dropped in August for the third consecutive month. The Conference Board's Consumer Confidence Index was 93.5, down 3.9 points from the revised 97.4 in July. The Index fell below economists expectations of 97.0 and is the lowest reading since November 2001. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
Confidence dropped across both portions of the Conference Board index. Present Conditions, measuring how consumers perceive the current state of the economy, declined sharply to 92.0 from 99.4 in July.
The Expectations portion of the index, another factor in the total composite index, decreased 1.6 points to 94.5 in August. This index is a measure of future economic activity.
The University of Michigan's Consumer Sentiment Index, a comparable index, also decreased in August to 87.6 from 88.1 in July. Both component indices fell. The Present Conditions portion fell 1.7 points in August to 98.5. The Expectations Index was down slightly to 80.6 from 81.0 in July.
Drops in both consumer confidence indices renew concerns about the potential for a decline in household spending. Confidence has been shaken by unstable financial markets, weak business spending, and the lack of significant improvement in labor markets. On the other hand, consumer spending on major purchases remains strong, as home sales have been boosted by low interest rates and vehicle sales by incentives.
Economists remain hopeful that consumer confidence will improve in the coming months, bolstered by a stabilizing stock market and moderately improving labor market. Since consumer spending accounts for two-thirds of the U.S. economy, consumer confidence remains a critical component for economic recovery.
Sources: www.cnnfn.com
www.conference-board.com
www.economy.com
