US Consumer Confidence Takes A Knock
September 25, 2007
US consumer confidence has fallen beyond analyst expectations over the month of September, to some of its lowest levels over the last two years as the continued sub-prime sector fallout hinders market performance.
The US Conference Board Confidence Index reflected a downturn in investor confidence over the course of the last month, a phenomenon it attributed to a strained global credit environment and uncertainty particularly in relation to employment markets.
The confidence index was down from 105.6 in August to 99.8 in September, sharply below analysts’ expectations of a fall to around 104.0 over the same period and now at its lowest level since late 2005, reflecting a dull outlook for economic health over the immediate future.
The ongoing unrest from within the sub-prime sector has undoubtedly had a part to play in the bleak consumer outlook, with credit conditions less than favourable and markets wholly unsettled as a result of the ongoing liquidity shortage.
As a result, consumers and businesses have adopted significantly more prudent attitudes towards spending and investing in light of the growing uncertainty that exists on a global level, which will likely have a cyclical effect on growth within the US economy over the medium term.
The news comes almost immediately off the back of a warning from former Chairman of the Federal Reserve that the US economy is en route to a recession through 2008 as a direct result of related sub-prime problems.
Consumer confidence bears particular importance within the US economy given that domestic spending accounts for over 60% of national economic activity, hence a bleak consumer outlook can have a heavily detrimental effect on the US economy in the long run.
Despite the Federal Reserve’s interest rate cuts of last week, consumers still seem yet to benefit from any confidence boost or bounce from the news, although many analysts are predicting this is more likely to be felt in next month’s figures.