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Consumer confidence tanks

How's consumer confidence? The Old Navy store in San Francisco, Calif., doesn't take any chances.

Let's talk consumer sentiment: the monthly Conference Board figures came out today. The general consensus was that sentiment would drop, though not significantly.

Instead it tanked. Consumers apparently are not confident at all about their economic prospects.

The Consumer Confidence Index fell to 44.5, it's lowest level since April 2009. That compares to 59.2 reading in July 2011. Economists had only expected the Index to drop to 52.

We decided to talked to Ken Goldstein, an economist at the Conference Board. He says that the steep drop in confidence is not about the shenanigans in Washington, D.C. over the debt ceiling.

Rather, Goldstein says it's about the real lives of real people. Americans are bombarded with news about a stalling recovery in the mass media, then they're talking about it with friends, neighbors and the like.

He says that, two years after the recession, consumers essentially are saying they don't care what "egghead economists" declare about the end of the downturn; the economy they see is still a mess and isn't getting better fast enough to make them happy.

Goldstein says it's that happiness that prompts consumers to grab their wallets, hit the malls, and spend money. He also says that we need a few more months of data to determine whether Americans are in a temporary foul mood, or in a longer-lasting funk.

In other new on the show today, the Marketplace Daily Index dropped 2 points on news that lenders are giving into risk again by handing out more subprime loans to car buyers.

About the author

David Brancaccio is the host of Marketplace Morning Report. Follow David on Twitter @DavidBrancaccio
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Thanks you for your show on consumer confidence. While news in the media of the stagnant economy and the unhappiness it engenders is clearly important to many American consumers, for me there is another issue at play, one that I feel has not been adequately addressed.

For me the biggest issue is the incredibly low return I get on my investments. My 401K has either lost money or paid virtually nothing over the past several years. Additionally, my other modest investments, which used to give me mad money (money for travel, home improvements, etc.) at the rate of about $500 or so a quarter, no longer perform. No longer do I have the cushion or the funds to spend like I used to. As for my stagnant 401K, I feel I must conserve and save above and beyond the prescribed withholdings (I’m retiring in five years or so) because it no longer grows in the way I was led to believe it would and for which I had been planning.

When it is said “the banks (and other corporations) are just sitting on the money,” it has real meaning for me – the money they are sitting on reduces my spending directly.

Ed Lovejoy

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