Economy Watch: Consumers Confidence Peaks in August

Consumer confidence was the highest its been all year in August, which bodes well for retailers as the holiday season approaches.

shoppingThe Conference Board released another positive metric about the economy on Tuesday. Its Consumer Confidence Index, which had decreased slightly in July, bounced back in August. The index now stands at 101.1 (1985 = 100) compared to 96.7 in July. The Present Situation Index rose from 118.8 to 123.0, while the Expectations Index improved from 82.0 last month to 86.4.

All together, these are the highest readings for consumer confidence in about a year. Consumers’ appraisal of current conditions also improved in August. Those saying that business conditions are “good” increased from 27.3 percent to 30 percent, while those saying business conditions are “bad” remained virtually unchanged at 18.4 percent.

That’s almost a complete reversal from the years of the recession, and bodes well for consumer spending as the holiday season approaches. Consumers’ optimism regarding the short-term outlook also picked up in August, the Conference Board noted. The percentage of consumers expecting business conditions to improve over the next six months increased from 15.7 percent to 17.3 percent, while those expecting business conditions to worsen decreased from 12.4 percent to 11.1 percent.

Why the optimism? That’s a little harder to say. After all, economic conditions in much of the rest of the world remain unsettled, and there’s the usual uncertainty that comes with a presidential election, amplified by circumstance this time around. On the other hand, other economic metrics have been strong lately, especially employment. On Friday, consumers will find out if employment growth continues to be strong, with the release of the BLS report on hiring.