US consumer confidence crashes to a 2-year low
Housing recession is making it hard for Americans to tap home equity to finance spending. A slowdown in hiring and slimmer pay hikes may weaken buying power.
By Agencies |
WASHINGTON: Consumer confidence fell in August by the most since just after Hurricane Katrina two years ago, as tumbling stock prices and lower home values left Americans feeling less wealthy.
Conference Board’s index of confidence declined to 105 from 111.9 in July. Economists had expected a reading of 104, according to a survey. Earlier on Tuesday, another report showed home prices in the US dropped by a record amount in the second quarter.
The housing recession is making it harder for Americans to tap home equity to finance the spending that accounts for 70% of the economy. A slowdown in hiring and slimmer pay raises may further weaken consumer sentiment and buying power.
“The things that are weighing on the consumer are getting pretty imposing,” said Gregory Miller, chief economist at SunTrust Banks in Atlanta, which last week announced job cuts. “The equity that he’s generated in his house over the years has been undercut” by falling prices.
The Conference Board report comes after S&P/Case-Shiller’s index showed home values dropped 3.2% in the three months through July from the same period a year before. The Case-Shiller report also showed that prices in June in 20 US metropolitan areas fell 3.5 percent from a year before. The decline compares with a 2.9 percent year-over-year drop in May. After the reports, the yield on the benchmark 10-year US Treasury note was unchanged at 4.56%. Stocks were lower.
Economists surveyed forecast the Conference Board index would decline to 104 from an originally reported July reading of 112.6, according to the median estimate in a survey of 73 economists. Estimates ranged from 99 to 108. The Conference Board’s measure of present conditions fell to 130.3 from 138.3 in July. The gauge of expectations for the next six months dropped to 88.2 from 94.4.
The share of consumers who said jobs are plentiful declined to 27.5% in August from 30% in July. The proportion of people who said jobs are hard to get rose to 19.7% from 18.7%. The proportion of people who expect their incomes to rise over the next six months slipped to 19.1% from 19.2%. The share expecting more jobs fell to 13% from 13.8%.
The Conference Board’s index tends to be more influenced than other sentiment gauges by consumer attitudes about the state of the labour market, economists said.
Plunging stock prices in the wake of a global credit crunch helped undermine consumer sentiment. The Standard & Poor’s 500 index fell as much as 9.4% from its July 19 historic high to August 15, when it started to recover. The labour market, while resilient, is showing signs of weakening.
Unemployment rose in July to 4.6% from 4.5%, still near the lowest in six years. Job growth slowed to 92,000 last month from 126,000 the prior month, down from last year’s average of 189,000 a month Consumer spending growth will probably average a 2.5% pace in the second half of 2007, unchanged from the first six months, according to economists surveyed.
Conference Board’s index of confidence declined to 105 from 111.9 in July. Economists had expected a reading of 104, according to a survey. Earlier on Tuesday, another report showed home prices in the US dropped by a record amount in the second quarter.
The housing recession is making it harder for Americans to tap home equity to finance the spending that accounts for 70% of the economy. A slowdown in hiring and slimmer pay raises may further weaken consumer sentiment and buying power.
“The things that are weighing on the consumer are getting pretty imposing,” said Gregory Miller, chief economist at SunTrust Banks in Atlanta, which last week announced job cuts. “The equity that he’s generated in his house over the years has been undercut” by falling prices.
The Conference Board report comes after S&P/Case-Shiller’s index showed home values dropped 3.2% in the three months through July from the same period a year before. The Case-Shiller report also showed that prices in June in 20 US metropolitan areas fell 3.5 percent from a year before. The decline compares with a 2.9 percent year-over-year drop in May. After the reports, the yield on the benchmark 10-year US Treasury note was unchanged at 4.56%. Stocks were lower.
Economists surveyed forecast the Conference Board index would decline to 104 from an originally reported July reading of 112.6, according to the median estimate in a survey of 73 economists. Estimates ranged from 99 to 108. The Conference Board’s measure of present conditions fell to 130.3 from 138.3 in July. The gauge of expectations for the next six months dropped to 88.2 from 94.4.
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The share of consumers who said jobs are plentiful declined to 27.5% in August from 30% in July. The proportion of people who said jobs are hard to get rose to 19.7% from 18.7%. The proportion of people who expect their incomes to rise over the next six months slipped to 19.1% from 19.2%. The share expecting more jobs fell to 13% from 13.8%.
The Conference Board’s index tends to be more influenced than other sentiment gauges by consumer attitudes about the state of the labour market, economists said.
Plunging stock prices in the wake of a global credit crunch helped undermine consumer sentiment. The Standard & Poor’s 500 index fell as much as 9.4% from its July 19 historic high to August 15, when it started to recover. The labour market, while resilient, is showing signs of weakening.
Unemployment rose in July to 4.6% from 4.5%, still near the lowest in six years. Job growth slowed to 92,000 last month from 126,000 the prior month, down from last year’s average of 189,000 a month Consumer spending growth will probably average a 2.5% pace in the second half of 2007, unchanged from the first six months, according to economists surveyed.
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