US experienced second straight fall of consumer confidence in August as the households worried about the economic outlook.The US Conference Board said on Tuesday its consumer confidence index dropped to a reading of 84.8 this month from 91.7 in July. Economists polled by Reuters had forecast the index edging up to a reading of 93 in August. It had tumbled in July to a reading of 92.6 as coronavirus infections spread in many parts of the country.
The Conference Board, a New York research organization, reported Tuesday that its Consumer Confidence Index fell from a June reading of 98.3. The weakness came from a drop in the expectations index, which measures consumer views about the short-term outlook for income, business and labor market conditions. The overall index stood at a high for this year of 132.6 in February before the pandemic forced shutdowns across the country in March and April.
The board basically measures the level of confidence consumers have in the economy. When consumers are optimistic, they tend to spend more which increases consumption and overall economic growth. A reading that is stronger than forecast is generally supportive (bullish) for the USD, while a weaker than forecast reading is generally negative (bearish) for the USD.The consumer confidence index is closely watched for signals it can send about future consumer spending, which accounts for 70% of economic activity.
The Conference Board said that the large decline in the expectations index reflected big drops in sentiment in Michigan, Forida, Texas and California. These are the states that have primarily seen a resurgence in coronavirus cases.
“Consumers have grown less optimistic about the short-term outlook for the economy and labor market and remain subdued about their financial prospects,” said Lynn Franco, senior director of economic indicators at the Conference Board. “Such uncertainty about the short-term future does not bode well for the recovery, nor for consumer spending,” he said. About 4.2 million confirmed COVID-19 cases have been reported in the United States, according to Johns Hopkins University, and there have been more than 146,000 deaths.
Robert Frick, an economist at Navy Federal Credit Union, said that the big drop in consumer expectations could reflect the fact that many Americans see a fiscal cliff looming.