Consumer confidence has taken a nose-dive in August as views on business continue to worsen along with the continued unemployment rate in the U.S., and stagnating incomes.
The Conference Board, a non profit agency, said its consumer confidence index fell to 44,4 % in August. This is the lowest level since April of 2009. It was the sixth largest one month decline in 21 years.“A contributing factor may have been the debt ceiling discussions since the decline in confidence was well underway before the S&P downgrade,” said Lynn Franco, director of the Conference Board’s consumer research center.
TD Securities, economic strategist, Millan Mulraine wrote in a recent research note that he expects consumer confidence to improve soon. “Given the recent improvement in financial markets, the sharp drop in energy prices in recent weeks and the improvement in borrowing rates, we expect a modest recovery in confidence in the coming month,” Mulraine wrote. “Nevertheless, given the crucial importance of consumer spending to the economy, if confidence remains at these levels it could spell trouble for the recovery as it could be a harbinger of further retrenchment in household — which will certainly be bad news for the recovery.”
While some sectors of the U.S. economy remain strong (manufacturing of autos and airplanes), the housing market continues to dog the economy. Some analysts are worried that this dive in consumer confidence could signal a trend of whats to come in the last quarter of this year.
The Federal Open Market Committee will release minutes of its August 9 meeting at 2 p.m. ET today. Investors will be seeking clues as to what the policy-setting panel’s economic outlook will be.