According to pretty much every news source in the U.S., consumers (also known as people) lost a portion of their confidence in August. It seems like sour news has been seeping from every vein of the U.S. economy lately. So much so that according to leading economists, financial woes (subprime mortgage defaults and personal/corporate debt) have overtaken terrorism as the primary threat to our nations well being.
It's finally reached a point where credit card companies might actually take a hit. Most people are still able to pay the card that feeds them despite high energy prices, a stagnant housing market and tighter lending conditions, but credit card default rates are on the rise.
Here's a quick rundown of this weeks economic report:
- Consumer Confidence dropped nearly 7 points to 105.0, its lowest reading in a year--the steepest decline since Hurricane Katrina
- House prices across the nation declined by 3.2 percent in the second quarter compared with the same period last year--the worst decline in twenty years
- The Present Situation component of the index decreased to 130.3 from 138.3 in July, reflecting that consumers were less positive about current conditions, especially in their appraisal of the labor market
- The "expectations" component, which declined to 88.2 from 94.4 showed that they are also less optimistic about business conditions and employment opportunities for the next six months
- Sales of existing homes fell to a five-year low in July, while the inventory of unsold homes hit the highest level since 1991, and not far off its record high.
There is more, but I don't want to bore you.
Here's what Lynn Franco, Director of The Conference Board Consumer Research Center has to say about it:
"A softening in business conditions and labor market conditions has curbed consumers' confidence this month. In addition, the volatility in financial markets and continued sub-prime housing woes may have played a role in dampening consumers' spirits. But, despite less favorable conditions and in spite of all the recent turmoil, consumers still remain confident. And, current Index levels suggest further economic growth in the months ahead."Despite sharing a somewhat positive outlook for the foreseeable future, some believe the consumption boom is over for now. I have to say, with all of the negative economic press that has surfaced this week, I can't help but agree.
In a society that depends upon citizen's for two-thirds of spending, the confidence measure is closely watched to predict spending. I remember reviewing the index last year and reading similar news. It was not as dreary, but as people emerge from summer office hours, kids begin going back to school and everyone starts assessing the summer damage of travel and leisure, I would assume that many would be ready to watch their pennies during months to come. There are many other things that factor into the nation's current mood, but I wonder how much our summer fun wieghs on our short-term outlook this time of year. This is something I will have my eye on during the weeks to come.
I got my information from here, here and here.