Labor Market Drives Consumer Confidence Down Again

by devteam August 14th, 2009 | Share

Markets have been generally optimistic that the recession in ending and that recovery will begin in the current quarter, but the voices warning that recovery will be slow saw their beliefs confirmed this morning as Consumer Sentiment fell to its lowest level since March.

The Reuters/U of Michigan survey slid nearly 3 points to 63.2 in August, subtracting further from a 4.8-point decline in July.

More than two-thirds of the US economy is based on consumption, so a V-shaped recovery will remain a fantasy if consumers aren’t confident in the economy. With a 9.4% unemployment rate, that seems unlikely to change any time soon.

Current conditions and six-month expectations each fell this month. Current conditions fell more than 5 points to 64.9, its lowest reading since April, and six-month expectations fell one point to 62.1, its lowest reading since March.

“Confidence has proven to be a pesky creature to pin down, as it is clearly still very fragile,” noted TD strategist Charmaine Buskas. “There are a number of headwinds that remain important for the consumer outlook. The labor market remains soft, and oil prices continue to rise. Until these variables improve measurably, there will not be a consistent improvement in confidence.”

The report's index of Inflation Expectations fell one-tenth to 2.8% in August, with the 5-year forecast at +2.9%.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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