U.S. consumer confidence declined in August to its lowest level since November 2008.
According to the Thomson Reuters/University of Michigan index, consumer sentiment fell from 63.7 in July to 55.7 in August. With slowing economic growth, high unemployment, the S&P downgrade to the U.S. debt, and high market volatility, consumers have been bombarded by negative data this month that has shaken their confidence in recovery.
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During the second quarter, consumer spending rose at its slowest pace in over a year, and this month’s consumer confidence survey may indicate that trend has carried over into the third quarter. With consumer spending comprising roughly 70% of the U.S. economy, any declines can seriously hinder growth, increasing the odds that the government will need to intervene.
“Many of our problems today in the economy are now in the hands of elected officials, and consumers in general are not exactly confident that they can put us on a stronger economic path,” says Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. But today Chairman Ben Bernanke indicated that the Federal Reserve had no new plan to stimulate the economy, and Congress is focusing more on shrinking the deficit by decreasing spending rather than increasing spending to stimulate the economy.
The University of Michigan’s survey also found that Americans’ perceptions of current conditions — their financial situation, whether it’s a good time to buy big-ticket items, etc. — are worse in August than they were in July, declining from 75.8 to 68.7 on the index. The index of consumer expectations for six months from now, a more accurate indicator of the direction of consumer spending, dropped to 47.4, its lowest level since May 1980, from 56.