consumer confidence falls sharply in aug

there will be a lot of contributing factors to the next big downturn. this could be one. watch friday usa data releases. there will be many.


ECONOMIC REPORT
Consumer confidence falls sharply in Aug.
Confidence index falls to 99.6, lowest since last Nov.
By Greg Robb, MarketWatch
Last Update: 11:41 AM ET Aug 29, 2006


WASHINGTON (MarketWatch) -- U.S. consumer confidence fell sharply in August, the Conference Board said Tuesday.
The consumer confidence index fell to 99.6 in August from a revised 107.0 in July. This is the sharpest drop since Hurricane Katrina battered the Gulf Coast. Read full survey results.
The index is at its lowest level since last November, when confidence was recovering from the hurricanes.
The fall in August was sharper than expected. Economists expected the index to drop to 102.7 from the initial estimate of 106.5 in July. See Economic Calendar.
Stocks turned decisively lower after the Conference Board report was released. Read Market Snapshot.
Bond yields rose as traders were focused on the release later today of the minutes of the Fed's Aug. 8 interest-rate policy meeting. Read Bond report.
"Less favorable business conditions coupled with a less favorable job scenario" were the driving forces for the confidence drop, said Lynn Franco, director of the Conference Board Consumer Research Center.
"Looking ahead, the glass remains half empty as consumers are growing increasingly pessimistic about the short-term outlook," Franco said.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said "the expectations index is now so low that it is consistent, if sustained at its August level, with real consumers' spending rising at a year-over-year rate of only 2% or so. Ouch."
Other economists said they were not worried about the consumer.
"As always, we should concern ourselves most with what consumers are doing, not what they are saying. We appear to be on track to post the reacceleration in real consumer spending in the third quarter that we have been calling for, notwithstanding the dip in attitudes in August," said Steve Stanley, chief economist at RBS Greenwich Capital.
In August, the present situation index fell to 123.4 from 134.2, while the expectations index slipped to 83.8 from 88.9.
The decline in confidence came despite a drop in gasoline prices in the month. Gas prices are down 11 cents since Aug. 1.
Consumers' overall assessment of the economy was significantly less favorable in August. Those claiming conditions are "good" fell to 26.1% from 27.3%. Those claiming conditions are "bad" rose to 16.7% from 15.o%.
The outlook for the labor market was also less favorable.
Consumers saying jobs are "plentiful" fell to 24.4% from 28.6%. Those claiming jobs are "hard to get" increased to 21.1% from 19.6% in the previous month.
Consumers expect more inflation over the next year. Inflation expectations over the next 12 months rose to 5.5% in August from 5.1% in July. This is the highest level since last October.
Greg Robb is a senior reporter for MarketWatch in Washington.