EmailThe Conference Board's Consumer Confidence Index plummeted from 59.2 in July to 44.5 in August. This was the worst reading since April 2009. The Briefing.com consensus expected the Consumer Confidence Index to fall to 52.0.
The fact that the index fell to its worst reading since the heart of the "Great Recession" should not have been too shocking. The University of Michigan Consumer Sentiment Index for August had already revealed a sharp deterioration in confidence as that index fell to its lowest level since November 2008.
The reality of the situation, however, is that economic growth prospects are nowhere near as bad as they were in November 2008 or April 2009.
The move in confidence was most likely a reaction to media reports surrounding the debt ceiling negotiations. The consumer got a high dose of reality about the true size of the debt problem, the seeming incompetence of Congress to compromise on a methodology to alleviate the problem, and the prolonged economic weakness that could come from high debt loads.
Confidence is an extremely poor indicator for consumption growth. Consumption is reliant upon income growth. As long as the employment situation improves, consumption will grow with it regardless of the confidence reading.
