Consumer confidence slid 6.2 percent in August, fueled largely by the subprime crisis and its negative impact on stock prices, according to The Conference Board, a New York-based business research group.
The news sent the stock market on a slide today, as the Dow Jones industrial average dropped more than 100 points by the late morning.
The Conference Board Consumer Confidence Index now stands at 105.0, down from 111.9 in July. The index, which is based on a survey of 5,000 households, recorded its largest drop since the fall of 2005 when the combination of hurricanes Katrina and Rita sent gas prices over $3 a gallon in many cities.
Lynn Franco, director of the Conference Board's Consumer Research Center, said that along with the ongoing negative news in the housing market, other factors putting a drag on consumer confidence were a general softening in business conditions and an uncertain labor market.
"Basically, we are back to where we were in June, and we're looking at more caution ahead," Franco added.Bernard Markstein, senior economist and director of forecasting at the NAHB, said the slide in consumer confidence is no surprise.
"Thank goodness it wasn't worse," Markstein said. "However, it is a prelude to another blow in the housing market in the near term since it should translate to lower new-housing sales in the next month or two," he concluded. According to The Conference Board, consumers' assessment of current conditions fell somewhat in August compared to July. Those claiming conditions are "good" decreased to 26.4 percent from 28.3 percent, while those saying conditions are "bad" increased to 16.3 percent from 14.5 percent.
Consumers are also cautious in their short-term outlook. Those expecting business conditions to worsen in the next six months rose to 10.6 percent from 8.2 percent, while those anticipating business conditions to improve was unchanged at 15 percent.