Consumer confidence index takes a big hit in August
Consumer confidence index in the US plunged to its lowest level since November 2011, hinting the Americans are feeling worse about the economy than they have in a long time. The drop in the consumer confidence index is the latest swing for the volatile measure, which has been on a roller-coaster for much of the past year.
Americans are feeling worse about the economy than they have in a long time.Skip to next paragraph
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Despite an improving U.S. job and housing markets, the consumer confidence index fell to the lowest level it's been since November 2011. The results are the latest swing in the index, which has been on a rollercoaster.
This year, the index declined in January, rose in February and then posted four months of declines before registering an increase in July. August's reading indicates that the gains in the job and housing markets aren't big enough to put to rest Americans' economic fears, which could have an impact on how they vote in November's presidential election.
Home prices rose in June from the same month last year, the first year-over-year increase since the summer of 2010, according to The Standard & Poor's/Case-Shiller home price index that was released Tuesday. Additionally, all 20 cities tracked by the index rose in June from May, the second consecutive time in which every city posted month-over-month gains.
The job market also is slowly on the mend. Employers added 163,000 jobs in July, the most since February. Job gains averaged 73,000 jobs a month from April through June. But that's not enough to keep up with a rising population, and the unemployment rate increased to 8.3 percent from 8.2 percent in June.
Most economists say stronger growth is needed to produce enough jobs to lower unemployment — and make Americans feel better. The economy grew at an annual rate of 1.5 percent from April through June, down from 2 percent in the first quarter and 4.1 percent in the fourth quarter of 2011.
The Consumer Confidence index, which is based on a survey conducted Aug. 1 to Aug. 16 with about 500 randomly selected people nationwide, underscored that anxiety. The index is widely watched because consumer spending accounts for 70 percent of U.S. economic activity. It has remained well below the 90 reading that indicates a healthy economy — a level it hasn't touched since the recession began in December 2007.
In the latest reading, the percentage of consumers expecting business conditions to improve over the next six months declined to 16.5 percent from 19. Those expecting more jobs in the months ahead declined to 15.4 percent from 17.6 percent, while those expecting fewer jobs rose to 23.4 percent from 20.6 percent.
In addition to worries about jobs and business conditions, Americans' outlook may also be influenced by gas prices. They fell sharply from a peak of $3.94 in early April, but have started to surge again in recent weeks. In fact, gas prices at the pump rose 19 cents to $3.71 during the period that captures the survey. That could put more financial pressure on low and middle income shoppers.
Despite their economic worries, Americans appear to be optimistic about their future earnings potential. According to the index, the proportion of consumers expecting an increase in their incomes improved to 15.7 percent from 14.2 percent.