Consumer Confidence shows a modest recovery in August


The release of the Conference Board Index of Consumer Confidence showed a modest recovery in August, up 2.5 points to 53.5, following a sharp downturn in June that continued through July.  Consumers’ outlook improved in August, with the expectations index lifting 5 points to 72.5. However, their assessment of current conditions deteriorated, with a decrease of 1.5 points in the present situation index.  Concerns about the employment situation are weighing heavily on consumers’ attitudes, with 45.7% saying that jobs are hard to get and only 3.8% suggesting that jobs are plentiful.

Although consumers’ expectations improved in August, they remain pessimistic, with 17% of survey participants expecting business conditions to improve over the next six months, while 15% expect them to deteriorate.  Less than 15% of respondents are expecting employment prospects to improve, while more than 19% are expecting fewer jobs over the next six months. Similarly, less than 11% expect their income to increase over the next 6 month, while 16% expect it to decrease.

Confidence in the housing market remains very low, with only 2% of respondents indicating that they were planning to buy a home in the next 6 months – albeit a modest improvement from 1.9% in July. This compares to 3% of respondents planning to buy a home in August 2009 and 3.4% in August 2008. Of the 2% planning to buy a home, around one fifth, 0.4% of survey participants, were planning to buy a new home – also a moderate increase from 0.3% in July.

People are unlikely to purchase a home while their employment remains uncertain and their financial situation remains weak.  Therefore, we can expect the current pessimistic employment and income outlook to constrain housing demand over the near term.  However, as the economy gains momentum, job growth strengthens and consumer confidence recovers, we can expect substantial gains in housing demand through 2011 and 2012.

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