Brutal: Consumer confidence plunges almost 15 points in August, back to April 2009 levels
posted at 9:30 pm on August 30, 2011 by Allahpundit
The Conference Board Consumer Confidence Index®, which had improved slightly in July, plummeted in August. The Index now stands at 44.5 (1985=100), down from 59.2 in July. The Present Situation Index decreased to 33.3 from 35.7. The Expectations Index decreased to 51.9 from 74.9 last month…
Says Lynn Franco, Director of The Conference Board Consumer Research Center: “Consumer confidence deteriorated sharply in August, as consumers grew significantly more pessimistic about the short-term outlook. The index is now at its lowest level in more than two years (April 2009, 40.8). A contributing factor may have been the debt ceiling discussions since the decline in confidence was well underway before the S&P downgrade. Consumers’ assessment of current conditions, on the other hand, posted only a modest decline as employment conditions continue to suppress confidence.”…
Consumers’ short-term outlook deteriorated sharply in August. Those expecting business conditions to improve over the next six months decreased to 11.8 percent from 17.9 percent, while those expecting business conditions to worsen surged to 24.6 percent from 16.1 percent. Consumers were also more pessimistic about the outlook for the job market. Those anticipating more jobs in the months ahead decreased to 11.4 percent from 16.9 percent, while those expecting fewer jobs increased to 31.5 percent from 22.2 percent. The proportion of consumers anticipating an increase in their incomes declined to 14.3 percent from 15.9 percent.
There’s a glimmer of good news: More people now say that they plan to spend soon on big-ticket items like cars and major appliances, so that might be a shot in the arm for unemployment. If it’s true that the debt-ceiling standoff and S&P downgrade are weighing on confidence levels, then that effect should recede soon too. The extreme volatility on Wall Street this month also freaked people out, I’m sure, and that’s abated for now. We’re one eurozone wobble away from another panic cycle, but as long as things seem relatively stable there, I assume these numbers will rebound a bit next month — barring the arrival of the long-dreaded double dip, of course. Which may already be upon us.
Consumer confidence is the ultimate measure of how voters “feel” about the economy so it’s a natural metric to look at during primary season to see how comfortable the incumbent is. Ace has a post up noting the similarly grim new numbers from the Michigan index of consumer sentiment and the fact that the average index on election day for incumbents who lost was 74.8. (For incumbents who won reelection, it was 95.9.) The current index is … 55.7. I tried to find similar numbers for consumer confidence and came up with this list tracking the CC index for the month of October in every year dating back to 1977. The lowest it’s ever been was 38.8 in 2008, right after the financial crisis, and Obama stomped the candidate of the incumbent party in the election the next month. If you toss that number out on grounds that it followed an extraordinary economic event, the next lowest CC index in a presidential year was 1992, when it was 54.6. Again the incumbent party lost badly as Clinton ousted Bush 41. The index isn’t foolproof — in 2000 it was a stratospheric 135.8 and Gore lost to Bush anyway — but not only is O deep in the danger zone , he’s been stuck there for almost his entire presidency. You can view the monthly CC numbers for his first two and a half years here. The index finally nudged above 60 and held there during the first half of this year, but it’s declined steadily for four straight months to the point where we’re now back almost to the beginning of his presidency. Essentially, it’s the answer to the “Are you better off than you were four years ago?” question in graph form. Devastating. Not irreversible, but devastating.