Consumers Confident About Future, Less So About Current Conditions

Consumers are increasingly confident about the economy, according to The Conference Board's August Consumer Confidence Index released today. 

After hitting a five-year high in June before dropping an unrevised 2.2% in July, the index increased 0.5 points to 81.5 for August. Analysts were pleasantly surprised, having expected a second month of declines to 78. The index uses 1985 as its 100-point benchmark.

"Consumer Confidence increased slightly in August, a result of improving short-term expectations," said Conference Board Director of Economic Indicators Lynn Franco in a statement today. "Consumers were moderately more upbeat about business, job and earning prospects. In fact, income expectations, which had declined sharply earlier this year with the payroll tax hike, have rebounded to their highest level in two and a half years. Consumers' assessment of current business and labor market conditions, on the other hand, was somewhat less favorable than last month."

The index is comprised of responses from a random sample of consumers. In this latest report, respondents who believed that business conditions are "good" dropped 2.4 percentage points to 18.4%, while those who believed business conditions are "bad" stayed steady at 24.8%. 

Looking ahead, things look slightly better. Consumers are more optimistic than not about the future of general business conditions and jobs, as well as income expectations; 17.4% of those surveyed expect increases in income, while only 13.5% foresee a decline. 

Consumers' confidence in the economy is watched closely because their spending accounts for about 70% of U.S. economic activity. After hitting bottom at 25.3 at the depths of the Great Recession in February 2009, the index has bounced back. But it has yet to get back to the 90 reading that signals a healthy economy.

-- Material from The Associated Press was used in this report.

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