Consumer confidence droops in preliminary August survey

new york -- U.S. consumer sentiment deteriorated in August, falling to its weakest point in a year, as more expensive oil, declining home prices and turmoil in the financial markets all hurt confidence.

The Reuters/University of Michigan survey of consumer confidence said its preliminary reading for August was 83.3, well below a median forecast of 88 and a sharp fall from the previous month’s final reading of 90.4.

The unexpectedly weak reading backed the view that volatile swings in financial markets, including a slide in share prices since mid-July, are starting to damp the mood of consumers.

“I would have to say that it is not a good sign, and it is showing how the contagion on Wall Street is starting to affect Main Street,” said George Lucas, investment strategist at Deutsche Bank in New York.

The survey’s gauge of current economic conditions was 97.7 in early August, the lowest in 11 months and below the previous month’s reading of 104.5.

The survey’s one-year inflation expectations index came in at 3.2%, the lowest in five months and a drop from a reading of 3.4% the previous month.

Consumer sentiment is often taken as an indicator of future consumer spending, which accounts for two-thirds of U.S. economic activity.