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News > Economy
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Consumer confidence falls
Closely watched sentiment measure falls to lowest level since November 2001.
August 27, 2002: 11:28 AM EDT

NEW YORK (CNN/Money) - U.S. consumer confidence fell in August, a private research group said Tuesday, as the pillar of the economy's strength continued to show signs of the weakness that first appeared in July.

The Conference Board said its closely watched index of consumer confidence fell to 93.5 in August from a revised 97.4 in July. Economists expected the index to fall to just 97, according to Briefing.com.

The Conference Board's Expectations Index, measuring what the consumers expect the situation to be six months from now, fell to 94.5 from 96.1 last month. The Present Situation Index fell to 92 from a 99.4 reading in July.

The report followed a similarly negative report in July, when consumers were worried by corporate scandals and fears about the strength of the economic recovery, which fueled a sell-off in U.S. stocks. Despite August's declines, the Conference Board said there was no indication that consumers were about to stop spending altogether.

"There's no sign that spending is going to take off, but there's also nothing to show that consumers, finished with back to school spending, are going to put their hands back in their pockets and leave them there," Conference Board economist Ken Goldstein said.

Still, stock prices fell after the report, giving up earlier gains that had been fueled by an encouraging report about orders for durable goods made in U.S. factories. Treasury bond prices also fell.

Many economists were disappointed by the report, having hoped that an apparent stabilization in stock prices in late July and August would lift consumers' spirits.

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"If the markets continue to firm in September and confidence does rebound, then we will have dodged the bullet," said Joel Naroff, president and chief economist of Naroff Economic Advisors in Holland, Pa. "But the failure of confidence to remain at least near July's levels raises some questions as to the true condition of the economy."

Consumer spending accounts for about two-thirds of the nation's economic activity, and sustained confidence in the face of an economic slowdown of the last two years has helped support the U.S. economy in the face of slower business spending. If consumers were to give up the ghost, then the economy would almost certainly sink back into a recession that began in March 2001 -- the dreaded "double dip."

But Goldstein of the Conference Board and other economists said they thought the latest confidence data, based on a survey of 5,000 households in the first weeks of August, were consistent with consumer spending growth of between 2 and 3 percent.

"At its current level, [confidence] is consistent with real consumers' spending growth of about 3 percent -- not great, but not a double-dip," Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd., said in a note.

And it's still too early to tell, but the broad-based strength seen in the Commerce Department's durable-goods orders report points to increased business spending and activity at factories, which could eventually lead to more jobs, a critical factor in consumer confidence.

Somewhat encouragingly, in the Conference Board's report, the percentage of consumers expecting an improvement in the months ahead rose to 22.1 percent from 20.8 -- but an unspecified "greater percentage" of consumers thought things would get worse.

The number of respondents saying jobs were hard to get was unchanged at 23.9 percent. Those expecting fewer jobs to become available in the next six months increased to 18.1 percent from 17 percent, while those expecting more jobs rose to 17.5 percent from 17.3 percent.  Top of page




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.