Economic confidence in the United States continued to decline in August, according to Gallup’s Economic Confidence Index. The index averaged -13 in August, down from -12 in July, indicating once again that Americans remain more negative than positive about overall economic conditions.
Gallup began tracking consumer confidence daily in 2008, as the financial crisis was reaching its climax. The first reading was -32, well below the breakeven level at 0. From there, economic confidence hit record low of -60 shortly before the end of 2009, before stabilizing in a range between -21 and -35 for about two years. Confidence soured again in mid-2011, hitting a low of -52, but quickly stabilized to its previous, only modestly pessimistic range.
In May, buoyed by a string of relatively positive economic indicators and a slowly but consistently healing labor market, the index hit a high of -7. Economists were quick to cite this and similar consumer confidence readings from the Thomson Reuters/University of Michigan Surveys of Consumers and the Conference Board Consumer Confidence Survey as a reason for optimism about the recovery.
But with the taper timeline taking shape and a new round of fiscal negotiations on the horizon, it appears as if consumers are revisiting the higher levels of uncertainty that characterized the end of the 2012 and the beginning of 2013. Congress is due to once again tackle the debt ceiling at the beginning of the next fiscal year, and it’s unclear if the political climate has ever been more dense than it is now. Tapering of asset purchases by the U.S. Federal Reserve could also shake financial markets.
Gallup’s headline index is based on two components: an assessment of current economic conditions, and the perception of whether conditions are getting better or worse. For August, the assessment of current conditions remained unchanged at -14, while the outlook score fell two points from July to -11. Gallup points out that the overall decline from July to August is almost entirely attributable to a decline in the economic outlook, not a decline in current conditions.