Tuesday, September 30, 2008

Consumer Confidence Unexpectedly Improves

Americans' confidence in the economy unexpectedly improved in September, but the reading still hovered near a 16-year low and does not fully reflect the financial meltdown that has rocked Wall Street and Main Street in recent days.

The Conference Board said Tuesday that its Consumer Confidence Index is now at 59.8, up from a revised 58.5 in August. Economists surveyed by Thomson/IFR expected a reading of 55.5.

The level remains about half of what it was a year ago and near the lowest since the index registered 54.6 in October 1992 when the economy was coming out of a recession.

The cutoff date for responses to the survey was September 23 and doesn't capture Monday's stock market plunge that wiped away $1.2 trillion in the value of retirement funds, mutual funds and individual stock holdings.

The Presentation Index, which measures shoppers' current assessment of the economy, decreased to 58.8 from 65.0 in September. The Expectations Index, which measures consumers' outlook for the next six months, however, increased to 60.5 from 54.1 in August.

Consumer spending represents about two-third of all economic activity.

"September's increase in the Consumer Confidence Index was due solely to an improvement in the short-term outlook," said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. "However, these results did not capture all of the tumultuous events in the financial sector this month, and until the dust settles a bit more, we will not know the full impact on consumers' expectations."

Franco added that shocks such as the 1987 stock market crash "generally tend to have a temporary adverse effect on confidence, lasting on average two to four months unless they result in significant job losses."

"Just as noteworthy, consumers' assessment of current conditions continues to indicate that the current economic environment remains quite weak," she said.

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