Consumer Confidence Falls to 9-Month Low in August

Consumer confidence in the American economy sank to a nine-month low in August, the third straight monthly decline. Yet in July, demand surged for big-ticket durable goods such as cars and computers.

The latest batch of economic news Tuesday offered mixed signals to the economy’s direction and suggested that although consumers may be growing more nervous, business might be feeling a little better, analysts said.

Still, it is the actions of consumers and businesses--their willingness or reluctance to spend and invest in the months ahead--that will shape the recovery. Optimists are betting that consumers will keep their wallets open and that businesses will slowly step up investment. Pessimists worry that they won’t.

“It seems the economy is at an inflection point, a turning point, where it either picks up momentum from the second quarter or loses momentum,” said Lynn Reaser, chief economist for Banc of America Capital Management.

The Conference Board, a private research group, reported that its index of consumer confidence fell to 93.5 in August, the lowest level since November, from a revised 97.4 in July. The showing, much weaker than the 97 reading analysts forecast, raised questions about consumers’ appetite for spending in coming weeks.

“For the economy to start accelerating sharply, consumer confidence will have to start improving,” said economist Joel Naroff of Naroff Economic Advisors.

The index is used by economists to gauge the behavior of consumers, whose spending accounts for two-thirds of economic activity in the United States.

Confidence fell in June and July, but retail sales posted solid gains in those months as free-financing offers, especially on cars, and other incentives motivated buyers. Home sales in July also were strong, helped by low mortgage rates.

Meanwhile, orders to U.S. factories for costly manufactured durable goods jumped 8.7% in July, the largest gain since October, suggesting that businesses felt more optimistic about the appetite for their products. The advance came after a 4.5% drop in June.

July’s performance was far stronger than analysts had predicted. Their forecast gains ranged from 1.4% to 2.7%.

The strength in July was broadly based. Orders for cars, trucks and parts increased a strong 7.5%. Orders for machinery rose by a record 11.8%. Orders for computers jumped 13.9% and orders for communications equipment were up 10.4%. That’s good news for the high-tech sector, which was hit hard by last year’s recession.