ANALYSTS SHRUG OFF DIP IN CONSUMER CONFIDENCE

Byline: Alison Maxwell

WASHINGTON — Consumer confidence in August dropped for the second consecutive month as consumers began to fear the effects of the summer’s two interest rate hikes, the Conference Board reported Tuesday. However, analysts saw no reason to set off alarms.
The Consumer Confidence Index for the month edged down 0.4 to 135.8 in August from July’s revised index of 136.2, but still rode emphatically above a year ago. Last August’s index was 133.1. The July figure originally reported was 135.6. Consumer confidence slumped last October, when it was 119.3, but rose steadily each month until July, when it dropped 2.8 points from June.
“Hikes in interest rates, severe drought conditions in the Northeast and rising gasoline prices have helped dampen overall consumer optimism,” said Lynn Franco, associate director of the Conference Board’s Consumer Research Center.
But she added that the latest dips in the index “are not of great concern. Confidence in the future remains high and the consumer shopping spree continues, with consumer spending having generated virtually all U.S. economic growth during the first six months of this year.”
“This report confirms that the economy has been overheated,” said Stephan Thurman, deputy chief economist at the U.S. Chamber of Commerce. “Consumers are realizing it was time to moderate its pace. They’re saying let’s buckle down for awhile. Interest rate hikes will do that.”
But he stressed, “We’re not going into recession. The word is moderation, not downturn.”
“This month’s drop isn’t that big of a deal,” concurred Carl Steidtmann, director and chief economist at PricewaterhouseCoopers. “It just reflects interest rates rising and the increased volatility in the stock market.+The month-to-month changes, unless they’re larger than what we’ve seen, don’t really capture a shift in consumer mood.”
The present-situation index, measuring immediate economic expectations, dropped to 176.2, down from 179.2 in July.
Of consumers surveyed, 44.7 percent said current business conditions were “good,” while 45.8 percent described conditions as “normal.” In July, 45.1 percent said conditions were “good,” while 46.1 percent said they were “normal.” Consumers reporting business conditions as “bad” rose to 9.5 percent from 8.8 percent in June. About 13 percent said jobs were “hard to get,” up from 11.5 percent in July.
The expectations index, which measures consumer confidence for the next six months, bucked the downward trend and advanced to 108.9 in August, up from 107.6 in July.