NEW YORK – Consumers' confidence in August dropped almost 15 points to the lowest level since April 2009 as worries about the economy fueled the wildest stock market swings since the financial meltdown in 2008.
At a time when Americans are increasingly worried about a weak job market, higher costs for food and clothing and recent stock market turmoil, the falling confidence numbers raise new concerns about their willingness to spend and jumpstart the economy. That's particularly important since consumer spending accounts for 70 percent of U.S. economic activity.
"Consumer confidence deteriorated sharply in August, as consumers grew significantly more pessimistic about the short-term outlook," said Lynn Franco, director of The Conference Board Consumer Research Center in a statement.
The Conference Board said Tuesday that its Consumer Confidence Index fell to 44.5, down from a revised 59.2 in July. The number was the lowest level since April 2009 when the reading was 40.8. It also is far below the 53.3 that analysts had expected. A reading above 90 indicates the economy is on solid footing; above 100 signals strong growth.
A number of factors contributed to the index's decline. The index, which is based on a random survey of consumers sent to 5,000 households from Aug. 1 to Aug. 18, captured the wildest week on Wall Street since the financial crisis in 2008.
Four days into the survey period, on Aug. 5, S&P downgraded the U.S. federal debt and concern revived about the health of European banks. Following that, The Dow Jones industrial average had four consecutive days of 400-point swings for the first time in its 115-year history during the week that ended Aug. 12.
Besides debt talks and market fluctuations, Americans are still plagued by old economic worries. The nation's unemployment rate is stuck at 9 percent. Home values remain weak. And shoppers are facing rising costs for everything from food to clothing as retailers try to offset their higher costs for labor and materials.
As a result, one gauge of the index that measures how shoppers feel about the economy dropped to 33.3 from 35.7. Another measure that assesses shoppers' outlook over the next six months fell to 51.9, down from 74.9 last month.
Consumers' views on jobs, in particular, have become more pessimistic. Those claiming that jobs are "hard to get" increased to 49.1 percent from 44.8 percent, while those stating jobs are "plentiful" declined to 4.7 percent from 5.1 percent.
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 dropped to 14.3 percent from 15.9 percent.