There's no silver lining to this news: if spending follows sentiment, then the U.S. economy is in big trouble
What recovery? That must have been the question stuck in the minds of most Americans as consumer confidence fell dramatically this month, to its lowest level since March 2009. It was the biggest one-month drop since October 2008 -- when the financial crisis hit its climax. This disastrous result should have economists and policymakers sweating. Without the American consumer on board, the economic recovery doesn't stand a chance.
Here's the chart for the Conference Board's Consumer Confidence Index, going back to when the recession began:
In August, the index plummeted 14.7 points to 44.5. You can see pretty clearly from the chart that confidence has rarely dipped below 50 since mid-2009. Certainly, in a recovery it should be much higher. This level of sentiment is what you would expect to see as the economy is shrinking -- not expanding.
Most of the reason why sentiment fell so drastically stems from expectations weakening. Although consumers said their present situation was slightly worse in August than in July, they had a much more pessimistic view of the future, according to the Conference Board.