ECONOMIC INDICATORS

Consumer confidence in U.S. declines by most since October

BLOOMBERG FILE PHOTO/ARIANA LINDQUIST
RISING GAS PRICES prices, a jobless rate that’s been above 8 percent since the start of 2009 and limited income gains are keeping U.S. consumers glum.
Posted 8/28/12

WASHINGTON - Confidence among U.S. consumers fell in August by the most in 10 months as households grew more pessimistic about their employment prospects and the economic outlook.

The Conference Board’s index decreased to 60.6 from a revised 65.4 in July, figures from the New York-based private research group showed today. The 4.8-point decrease was the biggest since October. Economists projected a reading of 66, according to the median estimate in a Bloomberg survey.

Rising gasoline prices, a jobless rate that’s been above 8 percent since the start of 2009 and limited income gains are keeping consumers glum. Persistent pessimism raises the risk of a pullback in household purchases that account for about 70 percent of the world’s biggest economy.

“Things don’t look so good on the consumer front,” Chris Christopher, a senior principal economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “There is lower confidence and job prospects are not so great, so you’re seeing a very precautionary behavior set in. People don’t have much reason to spend very much.”

This month’s confidence reading was the lowest since November. Estimates for the Conference Board gauge ranged from 61 to 68 in the Bloomberg survey of 77 economists. The measure averaged 53.7 during the 18-month recession that ended in June 2009.

Stocks held losses after the figures, with the Standard & Poor’s 500 Index dropping 0.3 percent to 1,406.35 at 10:05 a.m. in New York. The yield on the benchmark 10-year Treasury note declined to 1.63 percent from 1.65 percent late yesterday.

Home prices

Another report today showed home prices in 20 U.S. cities rose in the 12 months ended in June, the first year-over-year gain in almost two years and showing improvement in the industry that precipitated the last recession. The S&P/Case-Shiller index of property values climbed 0.5 percent from a year earlier, the group reported in New York.

“We are very encouraged by our results,” Robert Toll, chairman of Toll Brothers Inc., said during an Aug. 22 call after the Horsham, Penn.-based luxury-home builder’s third-quarter earnings were better than expected. “We do remain cautious in our optimism, as we believe consumer confidence remains fragile and subject to the impact of negative economic and political headlines.”

The Conference Board’s measure of present conditions was little changed at 45.8 in August after 45.9 a month earlier. The measure of expectations for the next six months slumped to 70.5, the lowest since November, from 78.4.

Labor outlook

The percent of respondents who said they expected more jobs to become available in the next six months fell to 15.4 from 17.6 the previous month. The share who said they anticipated fewer employment opportunities rose to 23.4 percent, the highest since November.

The proportion who said they expected their incomes to decrease over the next six months rose to a 10-month high of 16.8 percent from 14.9 percent in July. Some 52.3 percent of consumers said jobs are currently not plentiful.

The percent of American consumers who expected better business conditions in the next six months declined to 16.5 percent in August from 19 percent. Some 17.7 percent say conditions will be worse, the most since October.

By comparison, the Bloomberg Consumer Comfort Index slumped in the week ended Aug. 19 to minus 47.4, the lowest level since January. The Thomson Reuters/University of Michigan preliminary August index of consumer sentiment improved after dropping a month earlier to the weakest level of the year.

Personal spending

A decrease in optimism may make it difficult for spending to strengthen. Purchases by consumers rose at a 1.5 percent annual rate in the second quarter, down from a 2.4 percent rate in the previous three months, according to Commerce Department data. An Aug. 30 report may probably show spending climbed in July by the most in five months, economists project.

A pickup in job growth probably helped sustain demand last month. Payrolls increased by 163,000 in July, the most in five months, according to Labor Department figures released Aug. 3.

Stock prices have also risen, making consumers feel better about their financial situation. The S&P 500 has advanced 2.3 percent in August through yesterday and is on pace for its third straight monthly gain.

At the same time, the jobless rate rose to a five-month high of 8.3 percent in July. The prices Americans are paying at the gas pump may also weigh on consumer confidence and spending. The average price of a gallon of regular gasoline has climbed 23.5 cents this month to $3.76, according to AAA, the nation’s largest auto club. Since reaching a low of $3.33 on July 1, the average has climbed 43 cents.

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