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Consumer confidence plummets in August

Pushed by a weakening jobs outlook and a declining housing market, consumer confidence in Florida and the nation fell sharply in August, according to separate reports issued Tuesday.

The Conference Board consumer confidence index, which had increased moderately in July, fell more than seven points to 99.6 from 107. The University of Florida’s consumer confidence index for the state fell 11 points to 76.
Both declines were the biggest since the aftermath of Hurricane Katrina last September.

"Consumer confidence lost significant ground in August and is now at its lowest level this year," says Lynn Franco, director of The Conference Board’s consumer research center. "Less consumer confidence chart favorable business conditions coupled with a less favorable job scenario have resulted in the largest one month decline in confidence since Hurricane Katrina last year."

Florida survey director Chris McCarty cited high energy prices, the Lebanon War, rising interest rates and the declining housing market as reasons behind the decline among the state’s consumers.

“The size and extent of the fall in confidence in August is very similar to the effects we saw last year following Katrina, without the hurricane,” McCarty said.

Nationally, consumers' outlook for the next six months turned more negative in August. Those anticipating business conditions to worsen increased to 12.9 percent from 10.9 percent. Those expecting business conditions to improve edged down to 15.9 percent from 16.1 percent.

Those expecting more jobs to become available in the coming months decreased to 14.0 percent from 14.3 percent in July. Those expecting fewer jobs increased to 18.3 percent from 16.5 percent. The proportion of consumers anticipating their incomes to increase in the months ahead declined to 17.7 percent from 18.3 percent.

In Florida, McCarty said confidence is expected to remain low through the remainder of 2006. Although the Federal Reserve is not expected to raise interest rates, they are also not expected to lower them. The increased pressure on consumers as the effects of declines in the real estate market come to bear will keep consumer confidence, and therefore spending, at low levels compared to recent years.