August’s Consumer Confidence Research Notes

by Jim Baird on August 27, 2013

CaptureConsumer confidence rises fractionally in August

Bucking expectations for a modest decline, consumer confidence edged higher in August to 81.5 from a revised 81.0 in July.  The index remains near its recent June high, the best reading for the index in five years.

Confidence has improved significantly since the beginning of the year, boosted by gains in stocks, broad-based improvement in the housing market, and steady job creation.  Despite those gains, confidence remains somewhat subdued by historical standards; the index remains well below its historical average of about 93.  There is still a fair amount of anxiety among consumers despite the passage of over four years since the economic recovery began and an understanding that the healing process for the economy is far from complete. 

Also on a positive note, home prices remain on an upswing, as the S&P Case-Schiller 20-city Index rose 0.9% in June.  The pace of improvement may be slowing modestly, but the index still posted a solid 12.1% increase over the past year.  The recent uptick in mortgage rates does present a risk to the housing market and could curb demand, but is unlikely to derail the recovery.  Assuming the economy continues to grow moderately and job creation remains on a positive path, the housing recovery is also likely to continue. 

While the economic landscape remains mixed, the recent surge in tensions in the Middle East has driven oil and gold prices higher, while weighing on stocks and other risk assets.  Investors were already weighing the potential for the Fed to begin paring its bond purchases in the coming months and the potential impact on stock prices.  The increasing probability of direct military intervention in Syria by the U.S. and its European allies is contributing to heightened anxiety as well.  The result has been an uptick in volatility, although it’s far from clear how long that may last.

The broad story for the economy remains largely unchanged.  Growth remains moderate, though many economists continue to expect better results in the quarters ahead.   Whether or not that expectation is met would seem to be a key catalyst for consumer spirits to rise further, supporting spending and a virtuous cycle for growth.

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US consumer confidence rises in August (Associated Press)

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