Drivers

Economic Watch: Consumer Confidence Down, Personal Spending Lackluster

September 27, 2013

By Evan Lockridge

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Following a string of at least slightly encouraging economic reports, two new ones are disappointing.

By Revisorweb via Wikimedia Commons
By Revisorweb via Wikimedia Commons

U.S. consumer confidence fell this month to a five-month low, according to the Thompson Reuters/University of Michigan Consumer Sentiment Index.

A final reading for the month has been upwardly revised from two-weeks ago, from a first reported 76.8 to 77.5. Both numbers compare to an August reading of 82.1. The decline follows it hitting a six-year high in July.

“Uneven job creation, minimal income growth, the looming threat of a government shutdown and fears the battle on Capitol Hill will lead to further tax increases, spending cuts or both played into the drop,” said chief economist, Lindsey Piegza of Sterne Agee.

“Coupled with the threat of rising financing costs undermining the recovery in housing, not to mention concerns surrounding international geopolitical strife…gosh, my confidence just dropped listing out all of the headwinds consumers are facing, it’s a wonder the decline wasn’t bigger!” she said

Piegza noted last week, the Conference Board’s consumer index showed a similar decline in consumer confidence dropping to a four-month low in September. “Going forward, certainty out of Washington and job creation in the private sector will be the fastest way to boost consumer confidence again,” she said. 

Meantime, a separate report from the U.S. Commerce Department shows personal spending in August increased for the fourth consecutive month.

It gained 0.3% from the month before, following an upwardly revised 0.2% increase in July.

Personal income also showed its biggest gain since February, adding 0.4%

Despite the increase, the news is not a good as one might think.

“Adjusting for inflation, real consumption continues to lose momentum throughout the third quarter,” said Piegza. “While consumers are still spending, purchases have become increasingly volatile as shoppers drastically shift the goods consumed each month. Rather than simultaneous growth in all categories, shoppers gobble up electronics one month, and apparel and furniture the next.”

She says going forward, without sustainable job and income growth, consumers will be reluctant to loosen their purse strings, noting back-to-school sales were lackluster and already some retailers are anticipating a less-than-stellar holiday shopping season.  

 

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