Consumer confidence improves in August

The Conference Board reported this morning that U.S. consumer confidence rose to a 53.5 level from a (revised) July level of 51.0.  Also important, consumer expectations for future economic activity rebounded up to 72.5 from July’s depressing 67.5.

Analysis:  Because the axis of my blog commentary for many months now has been the mood of the U.S. consumer there really isn’t much to add to the raw data above.  Clearly the more confident the consumer, the more robust the economy.  Frankly, the increase in August is not strong enough to convince me that the “game of chicken” I have been writing about has ended.

Normally when I report consumer confidence I don’t report the expectations of future economic growth portion.  I did today because most people don’t spend the money they actually have, but the money they anticipate having.  The economic downturn of the last two years has been a particularly sober time for the U.S. consumer.  Most households have been spending money as if they are going to have less in the future.  That has restored to balance spending with earning – a very welcome trend for the long-term health of the U.S. as a nation.  However, economic growth happens when folks start placing themselves into the future in their mind’s eye.  That is, anticipating future stability and growth, they spend money now, fulfilling their own prophecy.  A virtuous circle ensues.

In other words, I consider today’s data to be a necessary positive step in the right direction.  However, let me be the first to state that the mood of the U.S. consumer is still tender and vulnerable to bad news.  Several more months of positive news is necessary to break the imagination of the consumer from “caution now,” to “a brightening future.”

Importance grade: 8; if the data had been more positive then this would be a 10.  However, a consumer confidence reading of 53.5 is just barely about the critical 50.0 level.  Below 50 the U.S. consumer expects an economic contraction.  Clearly we are hovering just about that level.

Jason