Confidence Index Sinks to Lowest Level Since 1983

Americans are demonstrating the lowest consumer confidence since the nation was recovering from recession more than seven years ago, a business group said Monday.

The Conference Board’s consumer confidence index fell dramatically to 83.8 in August from 101.7 in July. The index, which uses 1985 as a level of 100, is based on monthly surveys of 5,000 U.S. households.

“Recession is more likely now than it has been in many years,” said Fabian Linden, executive director of the nonprofit group’s Consumer Research Center.

The pessimistic numbers were in contrast to relatively optimistic figures released Monday by the Commerce Department, which showed that consumer spending and personal income grew more in July than was expected. Since the latest confidence index figure is from August, it may be a more current indicator of consumer trends than the Commerce figures.

August’s level is the lowest that the index has sunk since April, 1983, just five months after the economy hit its weakest level during the 1982 recession.

The nearly 18-point drop in August was even greater than the fall recorded immediately after the October, 1987, stock market crash.

“Given the economic uncertainties generated by the Middle East crisis, a loss in the consumer’s sense of security is inevitable,” Linden said.

Since the beginning of July, oil prices have jumped about 70%, with most of the rise occuring after the Aug. 2 invasion of Kuwait by Iraq.

That oil price spike has caused gasoline prices to rise significantly and has led many economists to predict that the economy, already burdened by a huge federal debt, a savings and loan crisis and a credit crunch at commercial banks, will slide into recession before year-end.

The board said about 24% of the respondents believe that economic conditions are bad, up 3 percentage points from July. Only about 20% of respondents say conditions are good, a fall of 3 points.

Nearly 19% of respondents believe that conditions will worsen during the next six months, up from 12% in July.

PERSONAL SPENDING

Trillions of dollars, seasonally adjusted July ‘90: 4.67 June ‘90: 4.65 July ‘89: 4.40 Source: Commerce Department

PERSONAL INCOME

Trillions of dollars, seasonally adjusted

July ‘90: 3.67 June ‘90: 3.65 July ‘89: 3.47 Source: Commerce Department