As we've heard many times, consumer spending drives about 70 percent of our economy, which is why we watch the consumer confidence numbers so closely. And the latest one is a real stinker: Consumer confidence has now dropped to its lowest point since April 2009. The drop between July and August was the biggest single decrease since October 2008, the month after the financial sector collapsed.
What caused the drop? As you may know, the consumer confidence index is divided into two parts: an assessment of current conditions, and a short-term outlook for the near future. In the former category, the August numbers didn't change a whole lot. People saying that jobs are plentiful dipped slightly, from 5.1 percent to 4.7 percent; people who think current business conditions are bad rose from 38.7 percent to 40.6 percent.
The biggest increases were all on the forecasting side. Those expecting business conditions to worsen over the next six months increased from 16.1 percent to 24.6 percent. Those expecting jobs to become less plentiful over the next six months went from 22.2 percent to 31.5 percent. In other words, current economic conditions are only slightly worse than they have been - but consumers expect them to get much worse, very quickly.
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