Consumer confidence in the economy plunges
How did the average American shopper react to the downgrade of U.S. debt and turmoil in stock markets earlier this month? It wasn’t pretty.
One has to look to the 2008-2009 financial crisis for the last time U.S. consumers had such a dismal outlook on the economy, according to data released Tuesday morning.
The Conference Board's Consumer Confidence Index, a widely followed measure of consumer views, dropped to its lowest level in more than two years in August. The index now stands at 44.5, down from 59.2 in July, a drop of nearly 15 points.
"Consumer confidence has fallen back to recessionary levels," Chris G. Christopher, Jr., an economist with consultancy IHS Global Inisght, wrote in a note.
The last time views were near this low was in April 2009, just after the financial crisis had sent markets into a free-fall that had ended that March. The index stood at 40.8 in April 2009.
A Conference Board analyst said the decline in confidence this time around was probably sparked by the crisis in Washington surrounding the debt ceiling debate.
"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 research for the center. “Consumers' assessment of current conditions, on the other hand, posted only a modest decline as employment conditions continue to suppress confidence."
The present-situation index, which tracks how people feel about the current state of the economy, fell to 33.3 from 35.7. The big decline came in people's views about the future of the economy, with the expectations index dropping to 51.9 from 74.9 last month.
Consumers also increasingly view business conditions as “bad,” increasing to 40.6% in August from 38.7% in July while those who said jobs are “hard to get” increased to 49.1% from 44.8%.
-- Alejandro Lazo
Photo: Shoppers arrive for a going-out-of-business sale at a Santa Monica boutique. Credit: Los Angeles Times