Consumer confidence declines in August

Consumer confidence weakened in August as Americans focused on turbulent financial markets, a decline in home prices and tighter credit standards.

The New York-based Conference Board said Tuesday that its consumer confidence index declined to 105 from a revised reading of 111.9 in July, which was a six-year high.

Although the index was down, it was slightly stronger than the 104.5 that Wall Street analysts had expected.

“A softening in business conditions and labor market conditions has curbed consumers’ confidence this month,” said Lynn Franco, director of the board’s Consumer Research Center. “In addition, the volatility in financial markets and continued sub-prime housing woes may have played a role in dampening consumers’ spirits.”

The survey is closely watched because consumer spending represents two-thirds of the U.S. economy and confidence levels tend to influence spending.

“It was down, but that was widely expected with what’s going on with housing,” said Richard Huber, an economist with A.G. Edwards & Sons Inc. in St. Louis. “That’s weighing on consumers.”

Though lower, the August reading allows Federal Reserve policymakers to take a wait-and-see approach about cutting their key short-term interest rate, which they have held steady at 5.25% since June 2006, Huber said. Policymakers next meet Sept. 18.

“It removes their having to cut rates because of a broad-based consumer confidence meltdown,” Huber said.

The present situation index, which measures how shoppers feel about economic conditions, decreased to 130.3 in August from 138.3 in July.

The expectations index, which measures shoppers’ outlook for the next six months, fell to 88.2 from 94.4.

Consumers’ assessment of the labor market weakened only slightly.

Those saying jobs are “hard to get” increased to 19.7% in August from 18.7%. Those saying jobs are plentiful fell to 27.5% from 30% in July and those saying jobs are not so plentiful rose to 52.8% from 51.3%.