American confidence at lowest in a year

The number of consumers saying conditions are "good" dropped to 26.4% in August from 28.3% in July. Those claiming conditions are "bad" increased to 16.3% from 14.5%.

By GREG ROBB, MARKETWATCH
MarketWatch: In-depth global business coverage Softening economic conditions and volatility in financial markets led to a sharp decline in US consumer confidence in August, the Conference Board said Tuesday. The consumer confidence index fell to 105.0 in August from a revised 111.9 in July, which was a cyclical high, the private economic research group said. This is the lowest level of confidence since August 2006 and the biggest drop since the aftermath of Hurricane Katrina in September 2005. However, the decline in confidence was not as large as expected. Economists were forecasting the index to decrease to 104.0 from the initial July reading of 112.6, according to a survey conducted by MarketWatch. Economists thought the relentless bad news from the credit crunch in financial markets would lead to a sharp reversal in confidence. Lynn Franco, director of the Conference Board's research center, said the continued problems stemming from the woes in subprime mortgages may have played a role in the drop in confidence, but softening business and labor market conditions were also factors. "But despite less favorable conditions and in spite of all the recent turmoil, consumers still remain confident. And, current index levels suggest further economic growth in the months ahead," Franco said in a statement. In a separate television interview, Ken Goldstein, an economist with the Conference Board, said the index was "nowhere close to a recession right around the corner," and said consumers were showing resilience. "This number is still above 100. If we were about to go into recession, this number would be a good 30-40 points lower," Goldstein said. In August, the present situation index fell to 130.3 from 138.3. The index is seen as a good barometer of near-term spending plans. The number of consumers saying conditions are "good" dropped to 26.4% in August from 28.3% in July. Those claiming conditions are "bad" increased to 16.3% from 14.5%. The assessment of the labor market was less favorable than last month. Those saying jobs are "hard to get" rose to 19.7% from 18.7% in July. The expectations index fell to 88.2 in August from 94.4 in July. Inflation expectations were steady in August. In a separate report earlier Tuesday, Standard & Poor's reported that US home prices fell at a faster rate in the second quarter, down 3.2% compared with the same period in 2006. It marked the largest year-over-year decline ever recorded in the 20-year history of the Case-Shiller home price index. MarketWatch: In-depth global business coverage