Consumer confidence drops after hitting six-year high
WASHINGTON -- Consumers’ optimism about the economy unexpectedly dropped this month after hitting a six-year high in July as worries increased about government efforts to boost the economy, according to survey results released Friday by the University of Michigan and Thompson Reuters.
The widely watched consumer confidence index was at 82.1 in August, down from 85.1 the previous month. The reading still was up sharply from a year earlier, when it was 74.3, and indicates increased consumer spending in the coming months.
Analysts had expected little change in the index in August. This week, the other leading barometer, from the Conference Board, showed consumer confidence improving slightly this month after slipping in July.
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The Michigan/Reuters survey found consumers’ views of current economic conditions and their outlook for the coming months slipped as they anticipated battles over government spending in Washington and a decision by the Federal Reserve about reducing its stimulus efforts.
“The August survey indicates that the recent confidence gains have stalled as consumers await decisions on the federal budget and monetary policy,” said Richard Curtin, the survey’s chief economist.
“Unlike a year ago, consumers do not anticipate that the budgetary issues will engender a similar congressional stalemate, but few express a great deal of confidence in the economic policies of the government,” he said.
Consumers were more optimistic about their incomes rising during the coming months than at any point since 2008. But the median expected increase of 0.9% would not even keep up with inflation.
About two-thirds of survey respondents expected interest rates to rise over the next year, and plans for buying automobiles and other durable goods dropped slightly in August from the previous month.
Mortgage rates have risen sharply in recent weeks after Fed officials indicated they were ready to start reducing their monthly bond purchases this year.
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