Consumer Confidence Down Sharply in August

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Includes: DIA, QQQ, SPY
by: Judith Levy

The Conference Board announced Tuesday that the U.S. consumer confidence index fell sharply in August to 105.0 from a revised high of 111.9 in July, its steepest fall since the aftermath of Hurricane Katrina in September 2005. Confidence is now at its lowest point in a year. Still, the result beat economists' forecasts of 104.0. Analysts differ on the implications of the report. "My guess is we're heading for a consumer-led recession beginning in a few quarters," said Oppenheimer chief investment strategist Michael Metz -- but Conference Board economist Ken Goldstein said the index was "nowhere close to a recession right around the corner." An S&P/Case-Shiller report released Tuesday showed a 3.2% decline in house prices versus a year ago, their worst decline in 20 years. The housing slump is making it more difficult for consumers to use home equity to finance their spending, which represents 70% of the economy. "Consumers are obviously paying attention to what's going on and are a little worried by it," said Wachovia analyst Adam York. "We are not expecting them to spend the way we thought they would a few months ago."

Sources: Reuters, Bloomberg, Forbes, Briefing.com, Financial Times, MarketWatch, Wall Street Journal
Commentary: U.S. Housing Numbers: Bad and WorseningMounting Losses and Unraveling Credit Markets: What a Difference a Year Makes This Bull Market's Got Two More Years
Stocks/ETFs to watch: SPY, QQQQ, DIA, IWM, SHY, IEF, TLT

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