Consumer Confidence Shows Signs of Weakening

[Sep 27, 2007.]

Consumer confidence showed signs of weakening in August—an apparent result of the ongoing housing crisis and the turbulent stock market.

The Conference Board, which is headquartered in New York, states that the Consumer Confidence index dropped to 105.0 for the month. That's down from the 111.9 rate recorded the month before.

Even though consumer confidence appears to be tumbling, the situation is not as bad as some economists had predicted. The director of the Conference Board's Consumer Research Center was quoted as saying that a downturn in business and labor conditions has caused consumer confidence to slide. The subprime loan predicament and Wall Street's woes have also had an impact.

It is important to note that the July consumer confidence rate has been revised from a previous rate of 112.6—the highest rate in half a dozen years.

Experts say that the consumer confidence rate is important because consumer spending accounts for 2/3 of the nation's economy. When consumers are especially confident, they tend to spend more; when they are not as confident, they tend to spend less.

In order to achieve the consumer confidence rate, the Conference Board surveys 5,000 American households. The survey measures consumers' outlook regarding both current economic conditions and the prospects for the coming 6 months. In the mid-'80s, the index stood at 100.

Meanwhile, the Present Situation index declined from 138.3 in July to 130.3 in August. That index determines how shoppers view economic conditions. The Expectations Index dropped from 94.4 in July to 88.2 in August. That particular index calculates the outlook of shoppers for the coming 6 months.

Consumers are apparently increasingly likely to say that jobs are "hard to get." In addition, the number of consumers claiming that jobs are easy to come by is decreasing. Experts say economic conditions could worsen in the coming months if the housing market continues to suffer.

Julie Ann Amos
September 27th 2007

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