The Conference Board's Consumer Confidence Index recorded its biggest single-month decline in 15 years as it fell to 86.6 in September, down nearly 19 points from the slightly revised August figure of 105.5. This is just the second reading below 100 since November 2004. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
Confidence decreased dramatically across both portions of the Conference Board index. The Present Conditions index tumbled 14.9 points to 108.9 in September. This index is a measure of how consumers perceive the current state of the economy.
The Expectations index, a measure of future economic activity, was 71.7 in September, down from 93.3 in August.
On the one hand, the decrease in the Conference Board's index was expected given the impact of Hurricane Katrina and increased energy prices. However, the extent of the decline in confidence was surprising given labor markets, which have remained healthy in regions outside those directly affected by Katrina.
The University of Michigan's Consumer Sentiment Index, a comparable index, decreased in September, down to 76.9 from 89.1 in August. Both components of the index fell, with the Expectations portion down 13.6 points to 63.3 in September, while the Present Conditions index decreased to 98.1 from 108.2 in August.
This is the first time since March 2003 this index has slipped below 80, with the other instance coming in February 2003 at the onset of the Iraq war. This month's decline is larger than the ten-point decline following the September 11 attacks.
Despite weakened consumer confidence in many areas, there are reasons for optimism. Energy prices are expected to gradually reverse and the impact of Katrina should fade as the federal government's greater efforts to remedy the situation take effect. Confidence will also be aided by continued steady gains in the labor markets.
Source: www.economy.com
