Reflecting the economic anxieties that many Americans felt over the past few weeks, consumers grew increasingly more pessimistic, according to the Conference Board. The Consumer Confidence Index fell from 59.2 in July to 44.5 in August. It had been 72.0 in February. The largest decline came from the expectations component, which plunged from 74.9 to 51.9. The index for the current economic environment – which was already low – moved from 35.7 to 33.3.
In the accompanying press release, Director of The Conference Board Consumer Research Center Lynn Franco writes:
“Consumer confidence deteriorated sharply in August, as consumers grew significantly more pessimistic about the short-term outlook. The index is now at its lowest level in more than two years (April 2009, 40.8). A contributing factor may have been the debt ceiling discussions since the decline in confidence was well underway before the S&P downgrade. Consumers’ assessment of current conditions, on the other hand, posted only a modest decline as employment conditions continue to suppress confidence.”
An increasing number of respondents said that jobs were hard to find, with the index rising from 44.8 to 49.1. Along those lines, more people also cited income concerns. In terms of buying plans, there was a modest improvement in those individuals who intended to purchase an automobile or appliance, but a slight decrease in those looking for a home.
Interestingly, this survey was released the day after the Bureau of Economic Analysis reported a sharp rebound in consumer spending in July. With that said, it mirrors similar statistics from the University of Michigan survey on consumer sentiment. Clearly, consumers grew more anxious in the past few months as they faced a number of headwinds, with the deficit discussion, U.S. debt downgrade, and European challenges being the latest events to sap overall confidence.
Assuming we can move past these challenges and economic growth recovers in the second half of this year, consumer optimism should grow. But, these numbers suggest that many of these factors have taken a huge toll. Manufacturers will be following these sentiments – as well as overall spending tendencies – very closely.
Chad Moutray is chief economist, National Association of Manufacturers.