In the wake of disappointing consumer confidence data for August, released Monday by America’s Conference Board, US stock markets fell steeply on Tuesday when the Dow Jones Industrial Average, bellwether of US stock markets, plunged 160 points to 10,222 by the end of trading.
The board’s Consumer Confidence Index slid to 114.3 points, down from July’s 116.5 and its lowest level for the past four months. The data disappointed economists whose consensus forecast had been a rise during August to 117 points, which would have confirmed hopes that the US economic slowdown had been halted.
The gloom was intensified by the Present Situation Index, an instant snapshot of consumers’ perception of the economy. This also fell, from 151.3 in July to 145.8 in August.
Those seeking a silver lining took comfort from the fact that the latest figures, discouraging though they may be, are still well above February’s low of 109.2 and are positively radiant compared to the lows of the previous US recession
But hopes were dashed that consumer spending would enjoy a surge after the Bush administration’s $300-per-household tax rebate. Spending, albeit relatively healthy, remained static, the Conference Board opining that the debt burden borne by US consumers – who on average spend around 6% more than they earn – had engendered an increasing fear of losing their jobs.
This view was supported by interview data: the number of families believing that “jobs are hard to come by” rose from 14.1 in July to 15.9 in August. Furthermore, there was an increase in the number of consumers believing that the economy would worsen before it gets better.
News source: BBC Online Business News (UK)