CCI Falls to Lowest Level in Over Two Years





Consumer confidence on the decline - IllustrationIn yet another sign that the United States may be fast slipping into another recession, the Consumer Confidence Index (CCI) plunged to just 44.5 in August. This is the lowest that the CCI has been since April of 2009.

The July reading for the CCI was 59.2, which makes the drop from July to August the largest since October of 2008, which is when the global financial system nearly imploded.

Economists had been expecting a reading of 52 in August.

The Consumer Confidence Index, which is calculated by The Conference Board, is a "barometer of the health of the U.S. economy from the perspective of the consumer." The index calculates both consumers' perceptions of current business and employment conditions, as well as expectations for six months out. Opinions on current conditions have a 40% weighting in the index, while future expectations receive a 60% weighting.

The index is benchmarked to 1985 (1985=100). 1985 was chosen because it was neither "a peak nor a trough". Because the index is benchmarked to 1985, ratings of over 100 are possible. The last time that the CCI was over 100 was August of 2007 (105.6).

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The reasons behind the precipitous drop in consumer confidence are pretty easy to see.

To start, the employment market is still very tight with a national unemployment rate of over 9%.

In addition, many US consumers have seen their wealth deteriorate over the past couple of years, thanks in large part to a slumping housing market.

Inflation is also attacking the wallets and purses of many Americans, as the average consumer is being forced to pay more for food and gas.

On top of all of that, the recent debt ceiling fiasco and subsequent downgrade from S&P have flustered many Americans and made them even more pessimistic about the future. And, of course, we can't forget about the fact that the country is still posting trillion dollar deficits and possesses a debt load of nearly $15 trillion.

Optimistic Americans are getting harder and harder to find these days, and this played out in the recently released August Consumer Confidence Index number.

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FYI, we are still a ways off from the lowest CCI levels posted since the "Great Recession" started in December of 2007. In February of 2009, the CCI was just 25.3. The next month wasn't that much better (26.9).




Filed under: The Economic Meltdown

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