US consumer confidence drops sharply in August

WASHINGTON — Fear of the fast spreading Delta variant of COVID-19 and rising prices undermined Americans' confidence in August, according to a survey released on Tuesday.

The Conference Board said its consumer confidence index fell more than 10 points to 113.8, the lowest since February and the second consecutive monthly decline after the July index was revised down to 125.1.

"Concerns about the Delta variant — and, to a lesser degree, rising gas and food prices — resulted in a less favourable view of current economic conditions and short-term growth prospects," Lynn Franco, senior director of economic indicators at The Conference Board, said in a statement.

The surge in infections and hospitalisations due to the new variant has caused businesses to re-impose mask-wearing requirements, while the end of government stimulus benefits has taken a toll on free-spending consumers. 

At the same time, the recovering economy continues to deal with supply bottlenecks that have sent prices rising.

Franco noted that while plans for major spending — on homes, autos, and major appliances — "cooled somewhat," more Americans are planning vacations in the next six months.

"While the resurgence of COVID-19 and inflation concerns have dampened confidence, it is too soon to conclude this decline will result in consumers significantly curtailing their spending in the months ahead," Franco said.

However, the expectations index which reflects consumers' short-term outlook for income, business and labour market conditions dropped to 91.4 from 103.8.

Consumer views on the current and future prospects for the labour market deteriorated very slightly, while sentiment about business conditions were more downbeat, according to the survey.

Economist Robert Frick of Navy Federal Credit Union said confidence "finally succumbed to the rising COVID-19 Delta wave".

However, he said, "Americans overall are flush with cash and eager to spend it as the economy reopens."