Consumer Confidence Falls in August Over Gas Prices

U.S. consumer optimism fell more than expected in August from July because of record gasoline prices at the height of the summer driving season, a report said Friday.

The University of Michigan said its reading on consumer confidence at the end of August was 89.1, down from a 96.5 final reading for July.

The final August figure was below an initial reading of 92.7, which was what analysts also expected for the final reading.

“The obvious culprit here is gasoline prices,” said Ryan Wang, an economist at HSBC. “This is a sign that the sharply higher gasoline prices in August are weighing heavily on consumer sentiment, and outweighing some of the optimism that’s starting to come from the labor market.”

Retail gasoline prices hit a record nationwide average of $2.61 per gallon last week, up 6.2 cents from the prior week, the U.S. Energy Information Administration said Monday.

The survey’s expectations component finished at 76.9, down from a final July reading of 85.5. The gauge on consumers’ views of their current economic conditions ended at 108.2, down from 113.5 in July.

“This seems to have more impact on people’s expectations than current conditions,” said Kevin Logan, an economist at Dresdner Kleinwort Wasserstein in New York. “What changed was the price of gasoline, and people know that that can eventually lead to some kind of slowdown.”

Consumer spending accounts for two-thirds of U.S. economic activity and has been vital to growth in this economic cycle.