August: A Month of Consumer Woes

There have no doubt been issues with our economy for years now, but it seems as though it has taken a turn for the worse yet again. In fact, Americans are now more pessimistic about the economy's current state than they were in July. The Consumer Confidence Index for August, put out by the Conference Board, a New York research business, fell from an already low 59.2 (July's reading) to an even lower 44.5. A reading of 90 or so represents a healthy economy, so a 44.5 is somewhat terrifying. If Americans don't believe in their own economy, who will?

The Consumer Confidence Index measures the attitude held by consumers on jobs and spending in the short term. Consumer spending makes up approximately two thirds of the US economy which makes me wonder: Will the economy ever get better? With all the bad things happening to the US right now (Standard & Poor's downgrade, Irene, the 9.1% unemployment rate, etc.) I can't help but be just as pessimistic as nearly everyone else. This latest report is likely to spread even more fear to the people, causing them to spend and invest less. This will in turn affect the fourth primary factor of production: entrepreneurship. With less trust in the security of the economy comes less risk taking (i.e. entrepreneurship). With one of the primary factors of production stunted, how can the economy be expected to change as much as needed?

While I would love to be hopeful about the economy, I'm just not so sure at the moment. With the lowered Standard & Poor's rating and the lowered Consumer Confidence Index, I simply don't have as much confidence in the economy as I would like. Who knows, maybe the lowered score is simply a reflection of people overreacting. I guess only time will tell if the economy has the strength required to pull itself back up.