Americans'confidence in the economy improved slightly in August, but the mood is still gloomy amid job worries, according to a monthly survey.
The Conference Board said Tuesday that its Consumer Confidence Index improved slightly to 53.5, up from a revised 51.0 in July. Economists surveyed by Thomson Reuters had expected 50.5. The improvement comes after two straight months of declines.
It takes a reading of 90 or more to indicate a healthy economy — a level not reached since the recession began in December 2007. The index — which measures how Americans feel about business conditions, the job market and the next six months — had been recovering fitfully since hitting an all-time low of 25.3 in February 2009. But August's reading suggests that American confidence hasn't improved from a year ago, a bad sign for the economy and for retailers.
Economists watch confidence closely because consumer spending accounts for about 70 percent of U.S. economic activity and is critical to a strong rebound. But worries are rising the economy is growing too slowly to support sustained job growth, and some are concerned it could fall back into a recession.
The slight improvement in August's Consumer Confidence Index was boosted by shoppers' improved outlook over the next six months. That gauge rose to 72.5 from 67.5. The other, which measures how consumers feel now about the economy, decreased to 24.9 from 26.4.
"Expectations about future business and labor market conditions have brightened somewhat, but overall, consumers remain apprehensive about the future," said Lynn Franco, director of The Conference Board Consumer Research Center in a statement.
New figures issued Friday show the economy is weaker than expected, and the outlook for the rest of the year is looking bleaker. The Commerce Department reported that gross domestic product grew at a 1.6 percent rate in the April-to-June period. The initial estimate was 2.4 percent, and even that was anemic. Meanwhile, home sales are plunging, and consumers are saving more and spending less as the unemployment rate remains stuck at almost 10 percent.
Last week, the National Association of Realtors said sales of previously occupied homes in the U.S. fell 27 percent in July, the weakest showing in 15 years. It marked the largest monthly drop in the four decades that records have been kept. Meanwhile, the Commerce Department reported that sales of new homes fell 12.4 percent in July from a month earlier. July's pace was the slowest in at least 47 years.
Federal Reserve Chairman Ben Bernanke said in a speech at the Fed's annual conference Friday that while he sees the economy improving next year, the central bank remains ready to take extra steps to stimulate the economy if necessary, including buying more debt securities to keep interest rates low.
Economists will closely watch Friday's reading on job figures for August, but they're bracing for more bad news. Economists surveyed by Thomson Reuters expect overall nonfarm payrolls to drop 100,000 jobs in August, dragged down by government cutbacks on the state and local level. Private employers were expected to add 54,000 jobs, which would mark the fourth straight month of tepid gains for that sector. Given the scenario, the unemployment rate is slated to tick up to 9.6 percent from 9.5 percent.
Against this background, consumers are waiting for the best deals and buying fashions that they can wear right away for the fall season. And stores don't expect shoppers to start spending anytime soon.
The Conference Board survey, based on a random survey mailed to 5,000 households from Aug. 1 to Aug. 24, showed shoppers remain worried about jobs. Those saying jobs are "hard to get" increased to 45.7 percent from 45.1 percent, while those claiming jobs are "plentiful" declined to 3.8 percent from 4.4 percent. Those expecting more jobs in the months ahead increased to 14.6 percent from 14.2 percent, while those anticipating fewer jobs decreased to 19.4 percent from 20.9 percent.