Consumer confidence seen holding steady; shoppers still gloomy as holidays approach

Ahead of the Bell: Consumer Confidence

NEW YORK — A monthly report Tuesday on consumer confidence is expected to show that Americans remained gloomy in August as they grappled with job worries and an economy that’s showing more signs of faltering.

The expected downbeat reading is the latest in a pile of bad news for the economy and for retailers, which have seen a slow start to the back-to-school shopping season, the second-most-important season after Christmas.

Economists surveyed by Thomson Reuters predict that the Consumer Confidence Index calculated by the private research group The Conference Board will be at 50.5 in August, barely up from 50.4 in July. The reading comes after two straight months of declines. July’s reading was down almost 4 points from June’s 54.3, which fell more than 8 points from May.

It takes a reading of 90 to indicate a healthy economy — a level not reached since the recession began in December 2007. The index — which measures how shoppers feel about business conditions, the job market and the next six months — had been recovering fitfully since hitting an all-time low of 25.3 in February 2009.

Economists watch confidence closely because consumer spending accounts for about 70 percent of U.S. economic activity and is critical to a strong rebound. But worries are rising the economy is growing too slowly to support sustained job growth, and some are concerned it could fall back into a recession.

New figures issued Friday show the economy is weaker than expected, and the outlook for the rest of the year is looking bleaker. The Commerce Department reported that gross domestic product grew at a 1.6 percent rate in the April-to-June period. The initial estimate was 2.4 percent, and even that was anemic. Meanwhile, home sales are plunging, and consumers are saving more and spending less as the unemployment rate remains stuck at almost 10 percent.

Last week, the National Association of Realtors said sales of previously occupied homes in the U.S. fell 27 percent in July, the weakest showing in 15 years. It marked the largest monthly drop in the four decades that records have been kept. Meanwhile, the Commerce Department reported that sales of new homes fell 12.4 percent in July from a month earlier. July’s pace was the slowest in at least 47 years.

Federal Reserve Chairman Ben Bernanke said in a speech at the Fed’s annual conference Friday that while he sees the economy improving next year, the central bank remains ready to take extra steps to stimulate the economy if necessary, including buying more debt securities to keep interest rates low.

Economists will be closely watching Friday’s reading on job figures for August, but they’re bracing for more bad news. Economists surveyed by Thomson Reuters expect overall nonfarm payrolls to drop 100,000 jobs in August, dragged down by government cutbacks on the state and local level. Private employers were expected to add 54,000 jobs, which would mark the fourth straight month of tepid gains for that sector. Given the scenario, the unemployment rate is slated to tick up to 9.6 percent from 9.5 percent.

Against this background, consumers are waiting for the best deals and buying fashions that they can wear right away for the fall season. And stores don’t expect shoppers to start spending anytime soon.

Many retailers, including J.C. Penney Co., J. Crew Group Inc. and Lowe’s Cos., offered disappointing outlooks as they reported their second-quarter results in recent weeks. Meanwhile, computer makers are scrambling for ways to pump up faltering consumer demand after a weak start to the back-to-school shopping season. Intel Corp. lowered its forecast for the third quarter on Friday, saying demand for consumer PCs has been weaker than projected.

Consumers are “deferring, they’re waiting, they’re comparison shopping, and people are a little nervous,” Millard Drexler, chairman and CEO of J. Crew, said in a conference call with analysts last week.

The Conference Board survey is based on a random survey mailed to 5,000 households from Aug. 1 to Aug. 24.