August Consumer Confidence Rebounds

The Conference Board, New York, said yesterday its Consumer Confidence Index rebounded in August after declining in July.

The Index improved to 101.5, up from 91.0 in July. The Present Situation Index increased from 104.0 to 115.1, while the Expectations Index improved to 92.5 from 82.3 in July.

“Consumers’ assessment of current conditions was considerably more upbeat, primarily due to a more favorable appraisal of the labor market,” said Lynn Franco, director of economic indicators with The Conferrence Board. “The uncertainty expressed last month about the short-term outlook has dissipated and consumers are once again feeling optimistic about the near future. Income expectations, however, were little improved.”

The report said consumers’ assessment of current conditions came in considerably more favorable in August. Those saying business conditions are “good” decreased marginally from 23.4 percent to 23.2 percent. Those claiming business conditions are “bad” declined modestly from 18.2 percent to 17.6 percent. Consumers were considerably more positive about the job market. Those stating jobs are “plentiful” increased from 19.9 percent to 21.9 percent, while those claiming jobs are “hard to get” decreased from 27.4 percent to 21.9 percent.

Consumers’ optimism about the short-term outlook also improved in August. The percentage of consumers expecting business conditions to improve over the next six months increased slightly from 15.3 percent to 15.8 percent, while those expecting business conditions to worsen declined from 10.3 percent to 8.3 percent.

Consumers’ outlook for the labor market was more upbeat. Those anticipating more jobs in the months ahead increased from 13.7 percent to 14.6 percent, while those anticipating fewer jobs decreased sharply from 19.0 percent to 13.6 percent. The proportion of consumers expecting their incomes to increase declined moderately from 17.0 percent to 16.2 percent, while the proportion expecting a decline decreased from 11.3 percent to 10.0 percent.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said given recent stock market volatility, confidence could likely fall back next month.

“Today’s confidence reading reinforces our view of consumer spending remaining the key support to economic growth over the coming quarters,” Vitner said. “The biggest potential risk to our outlook remains the magnitude by which the current equity market volatility results in reduced consumer confidence. Should confidence erode in a dramatic way, there could be greater downside risks consumer spending and overall growth. Going into the
market turmoil, however, consumers were feeling pretty good about the economy and job prospects in particular. That positive momentum should be evident in other reports for August as well.”