Consumer Confidence Falls to 16-Month Low

Published by: Frank Galvano on 30th Aug 2011 | View all blogs by Frank Galvano
Consumer Confidence Falls to 16-Month Low

The Conference Board on Tuesday issued its monthly report on US consumer sentiment, showing confidence fell almost 15 points from July to its lowest level in 16 months.  The massive swings in the stock markets earlier in the month, and concern over the continually weak job market, have consumers worried, and economists concerned that consumer spending, which accounts for about 70 percent of economic growth, will stagnate as a result of those concerns.

The Conference Board's monthly Consumer Confidence Index fell from 59.2 in July all the way down to 44.5 on the latest reading.  It represents the lowest reading on the index since April 2009, when it fell to 40.8.  Analysts were particularly disappointed with the index, being that they had projected a reading of 53.3, on average.  It is less than half of the reading of 90 that is considered to indicate a healthy economy, and even further from the level of 100 considered to be a sign of strong economic growth.

The biggest cause of the larger-than-expected decline in the index is timing.  The index was based on a random survey sent to 5,000 households between August 1st and 18th, meaning that the surveys were received in the middle of the most volatile stretch on US stock markets since the onset of the financial crisis.  During that time, S&P downgraded US sovereign debt, prompting the Dow to post four consecutive days of 400-points gains and losses for the first time in its 115-year history.

Outside of the unusual volatile movement in the markets, Americans are still concerned about the same basic woes that have plagued the economic recovery since the recession.  Unemployment remains elevated, at over 9 percent, home values remain depressed, and costs for everything from food to clothing keep getting higher.  As a result, the portion of the confidence index that deals' with consumers' view for the next six months fell from 74.9 in June to 51.9.

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