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Business Title: U.S. Consumer Confidence Falls to Two-Year Low Confidence among U.S. consumers plunged in August to the lowest in more than two years as Americans’ outlooks for employment, incomes and business conditions soured. The Conference Board’s index slumped to 44.5, the weakest since April 2009, from a revised 59.2 reading in July, figures from the New York-based private research group showed today. It was the biggest point drop since October 2008. Economists predicted the August gauge would fall to 52, according to the median forecast in a Bloomberg News survey. An unemployment rate above 9 percent, a downgrade of the country’s top credit rating, partisan squabbling over the budget deficit and a volatile stock market weighed on sentiment. Increased pessimism may make households less apt to open their wallets, a hurdle for the economy and retailers such as Gap Inc. (GPS) “This paints a picture of underlying demand weakening,” said Bricklin Dwyer, an economist at BNP Paribas in New York, whose forecast of 45 was most accurate in the Bloomberg survey. “Consumers are seeing their wealth deteriorate. We’ve seen a huge decline continuing in the housing market. They’ve also been hit on the chin by the equity markets.” Stocks extended losses after the report, with the Standard & Poor’s 500 Index declining 0.8 percent to 1,200.93 at 10:18 a.m. in New York. Treasuries climbed, pushing down the yield on the benchmark 10-year note to 2.17 percent from 2.26 percent late yesterday. Estimates for the Conference Board’s gauge ranged from 40 to 57 in the Bloomberg News survey of 70 economists. The index averaged 98 during the economic expansion that ended in December 2007. The cutoff date for the survey responses in this month’s calculation was August 18, Lynn Franco, director of the Conference Board’s Consumer Research Center, said in an interview. The group looked at the responses received before and after the downgrade of U.S. debt and saw very little difference, she said. “The decline we saw was already in place before the downgrade, and there was really already a significant change in confidence,” said Franco. Residential real estate prices decreased in the year ended in June at a slower pace than the prior month. The S&P/Case- Shiller index of property values in 20 cities fell 4.5 percent from June 2010, after a 4.6 percent drop in the 12 months ended in May that was the biggest since 2009. Today’s confidence report is in line with other figures. The Thomson Reuters/University of Michigan final index of consumer sentiment dropped this month to the lowest level since November 2008. The Bloomberg Consumer Comfort Index has been hovering at levels previously consistent with recessions. The Conference Board’s data showed a measure of present conditions declined to 33.3, the second-lowest this year, from 35.7 in July. The measure of expectations for the next six months slid to 51.9, the weakest since April 2009, from 74.9. The percent of respondents in the Conference Board survey expecting more jobs to become available in the next six months fell to 11.4, the lowest since March 2009, from 16.9 the previous month. The proportion expecting their incomes to rise over the next six months declined to 14.3 from 15.9 in July. The percent expecting a drop in incomes rose to 18.7, the highest since November 2009. The share of consumers who said jobs are currently hard to get increased to 49.1 percent, also the highest since November 2009, from 44.8 percent in July, signaling little improvement for the August employment data. Confidence dropped in all nine U.S. regions, according to today’s report. “If you were advised to lean on one side or the other, I’d say it’s more likely to be slightly more negative from a sentiment perspective in consumers in the United States,” Glenn Murphy, chief executive officer of Gap, said in an Aug. 18 conference call with analysts. “Maybe the holiday season could be slightly positive, but we’re not counting on it right now.” San Francisco-based Gap, the largest U.S. apparel chain, reported a 19 percent decline in second-quarter profit as price increases failed to keep up with higher costs to make clothes. Fewer respondents in the Conference Board’s survey indicated they were planning to buy a house, while more intended to purchase cars or major appliances in the next six months. A struggling labor market is weighing on Americans’ outlooks. Employers added 75,000 jobs in August, compared with 117,000 in July, as the unemployment rate held at 9.1 percent, according to the median estimates in a Bloomberg survey ahead of a Sept. 2 report from the Labor Department. “Economic growth has, for the most part, been at rates insufficient to achieve sustained reductions in unemployment,” Federal Reserve Chairman Ben S. Bernanke said Aug. 26 at the Jackson Hole, Wyoming, central bank symposium. “It is clear that the recovery from the crisis has been much less robust than we had hoped.”
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