Home/Mortgages/Consumer Confidence Increases in August but Outlook Remains Grim

September 11, 2012 (Chris Moore)

Consumer confidence improved in August as consumers held a more favorable view of their current financial condition but remained leery of their future financial prospects according to the latest Surveys of Consumers by Thomson Reuters/University of Michigan.

Consumer’s views of their own present personal finances improved during August with the reduction in the amount of their outstanding debt being the most frequently cited reason for their optimism.

But future prospects continued to be remain dismal in the opinion of the consumers surveyed with nearly half of those surveyed in August reporting that their finances were now worse than they were five years ago, and with half of the consumers expecting no improvement in their financial situation over the next five years.

Consumers expected economic growth to slow through the rest of the year with economic conditions remaining unfavorable until the start of 2013.

Two of the three indices that make up the Index of Leading Economic Indicators increased from July to August, with all three indicators were still well above last year’s levels.

The Consumer Sentiment Index increased 2.8 percent to 74.3 in August, up from 72.3 in July and up 33.2 percent from 55.8 in August of last year.

The Consumer Expectations Index fell to a level of 65.1 in August, down 0.8 percent from a level of 65.6 in July but was up 36.8 percent from a level of 47.6 in August 2011.

The Current Conditions Index increased 7.3 percent to 88.7 in August, up from 82.7 in July and was 29.5 percent higher than the reading of 68.5 in August of last year.

Richard Curtin, Surveys of Consumers chief economist stated, “Despite the August gain, confidence has been in a holding pattern during the past few months. Aside from the past few years, the average level of consumer confidence in 2012 was lower than in any other year since 1982. Currently, a major source of uncertainty is about when the fiscal cliff will be bridged, and who will bear the burden of the tax increases and the spending cutbacks. This uncertainty will increasingly cause consumers to become more cautious spenders. While some worry about the negative impact on spending from upper income consumers, the spending of every worker is threatened by the end of the payroll tax cuts in January.”

Tags: Surveys of Consumers, Reuters/University of Michigan, consumers, economic slowdown, finances, recession, financial expectations

Thomson Reuters/University of Michigan