Rising gas prices and stubbornly high unemployment soured Americans' outlook on the economy in August, with consumer confidence plummeting to the lowest levels of the year, according to a newly released report.
Consumer confidence fell almost 5 points to 60.6 from a July figure of 65.4, business research firm The Conference Board reported Tuesday. That makes the August figures the worst since November 2011, and casts further doubt on the direction of the nation's economy for the remainder of the year.
A negative outlook on the economy tends to make consumers pull back on purchases, which is bad news for an economy reliant on consumer spending to fuel 70 percent of its activity.
"Things don't look so good on the consumer front," Chris Christopher, a senior principal economist at IHS Global Insight told Bloomberg. "There is lower confidence and job prospects are not so great, so you're seeing a very precautionary behavior set in. People don't have much reason to spend very much."
And consumers don't see the dreary environment changing very much in the near term, which could mean consumers will keep their pocketbook clasps closed for longer. Only 15 percent of those surveyed expect jobs will be more plentiful in the future, down from nearly 18 percent in July. The outlook for business wasn't much better—only 16.5 percent of consumers felt that conditions would improve for businesses in the next six months, compared to almost 20 percent in July.
Thought experts warned that the small jump in July probably wasn't an indication of broader gains in consumer sentiment, the drop in August was more severe than many economists expected and in stark contrast to another measure of consumer confidence—the Thomson Reuters/University of Michigan report—which showed consumers feeling more upbeat about the economy. Released mid-August, the Thomson Reuters index of consumer sentiment rose by more than 1 percentage point.
But despite its gloomy outlook, the Conference Board report offered at least one nugget of good news. Consumers' outlook on their income improved, with almost 16 percent expecting their take-home pay to rise in the next six months, up from just more than 14 percent in July.
Meg Handley is a reporter for U.S. News & World Report. You can reach her at email@example.com and follow her on Twitter at @mmhandley.