Consumer Confidence Declines

I dont usually post on general economic news, but as we are starting the slow hot and long dog days of summer the current realities are not positive.  Like many business sectors, appraisal practices, auctions, and fine and decorative art dealers can all easily feel the impact of poor economic conditions through decreases in assignments, consignments, sales and total value.  Many small practices and solo professionals may believe this information does not apply to them, but I feel the general mood of consumers greatly impacts buying habits, especially on items and services that are not always considered necessary.

The July consumer confidence index was just released and the news is not good, with continued declines.  Consumer confidence is now at the lowest level in 5 months. The news is not all dire, with some indications that retail stores continue to sell but I wonder if that is more connected to necessities rather than discretionary purchases. I was hoping that after a very slow spring and a typically slow summer economic activity would start to look better in the fall.  Overall debt, high unemployment, tight credit, and high default rates are all contributing to the decline in confidence. The consumer confidence report/index shows we have a long way to go before the American consumer regain confidence in the economy.

Also noteworthy, and not to pile on with the gloomy economic forecasts and news, but the Fed just released its Beige Book results of economic activity.  The news was mixed which is better than being all bad, but the news was not strong when it came to consumer spending and manufacturing. The Wall Street Journal reported but with only modest advances in retail sales and weak numbers in housing and construction. Bank lending, meanwhile, was still tight. The weak snapshot came after a second consecutive monthly drop in demand for manufactured goods that was reported earlier in the day, casting more doubt on an economic outlook that Fed Chairman Ben Bernanke last week called "unusually uncertain."   Unusually uncertain, pretty much sums up the current state of the economy.

The weak snapshot came after a second consecutive monthly drop in demand for manufactured goods that was reported earlier in the day, casting more doubt on an economic outlook that Fed Chairman Ben Bernanke last week called "unusually uncertain."

The Conference Board press release states about the decline:

The Conference Board Consumer Confidence Index® which had declined sharply in June, retreated further in July. The Index now stands at 50.4 (1985=100), down from 54.3 in June. The Present Situation Index decreased to 26.1 from 26.8. The Expectations Index declined to 66.6 from 72.7 last month.

The Consumer Confidence Survey® is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world’s largest custom research company. The cutoff date for July’s preliminary results was July 21st.

Says Lynn Franco, Director of The Conference Board Consumer Research Center: “Consumer confidence faded further in July as consumers continue to grow increasingly more pessimistic about the short-term outlook. Concerns about business conditions and the labor market are casting a dark cloud over consumers that is not likely to lift until the job market improves. Given consumers’ heightened level of anxiety, along with their pessimistic income outlook and lackluster job growth, retailers are very likely to face a challenging back-to-school season.”

Consumers’ assessment of current conditions was more downbeat in July. Those saying conditions are “bad” increased to 43.6 percent from 41.0 percent, however, those saying business conditions are “good” increased to 9.0 percent from 8.4 percent. Consumers’ appraisal of the job market was also more negative. Those claiming jobs are “hard to get” increased to 45.8 percent from 43.5 percent, while those saying jobs are “plentiful” remained unchanged at 4.3 percent.

Consumers’ short-term outlook also deteriorated further in July. The percentage of consumers expecting an improvement in business conditions over the next six months decreased to 15.9 percent from 17.1 percent, while those anticipating conditions will worsen rose to 15.7 percent from 13.9 percent.

Consumers were also more pessimistic about future job prospects. Those expecting more jobs in the months ahead decreased to 14.3 percent from 16.2 percent, while those anticipating fewer jobs increased to 21.1 percent from 20.1 percent. The proportion of consumers expecting an increase in their incomes declined to 10.0 percent from 10.6 percent.