Consumer confidence rises in August

But low level highlights uncertainty

The Conference Board’s Consumer Confidence Index which had declined in July, increased from from 51.0 in July to 53.5 in August. The Present Situation Index fell to 24.9 from 26.4, but the Expectations Index increased to 72.5 from 67.5 last month.  Analysts surveyed by Bloomberg had expected a reading of 51.0.

Lynn Franco, Director of The Conference Board Consumer Research Center said, “Consumer confidence posted a modest gain in August, the result of an improvement in consumers’ short-term outlook. 

“Consumers’ assessment of current conditions, however, was less favorable as employment concerns continue to weigh heavily on consumers’ attitudes. Expectations about future business and labor market conditions have brightened somewhat, but overall, consumers remain apprehensive about the future. 

“All in all, consumers are about as confident today as they were a year ago (Aug. 2009, 54.5).”

Factors depressing confidence

Worries abound that the lack of job creation, uncertainty in the housing market and stubbornly high level of layoffs will continue to depress sentiment and hamper gains in consumer spending.

Consumers did become a little less stingy in July, as spending rose at its fastest pace since March; however,  Ben Bernanke said in his keynote address on Friday that consumer and business spending “"appears somewhat less vigorous than we expected."  And the general trend confirms his view.

Consequently, the economic  recovery has been sluggish and businesses are still reluctant to significantly add new jobs.

And it seems unlikely that spending will accelerate until consumers feel more comfortable with their own situation. Still, the rise argues against those who see a double-dip recession as all but imminent (see Case builds for double-dip recession but odds still favor recovery).